Soyoil futures stumbled, retreating on adjustments in the meal/oil spread relationship, building stocks amid slower domestic usage and spillover weakness from crude oil futures, analysts said. Crude oil influences soyoil due to its use in making renewable fuels. December soyoil settled 0.14 cent, or 0.4%, lower at 39.05 cents per pound.(Source: CME)
Crude Oil To Fall On Reduced Stimulus; Grains Sideways -Analysts(Source: CME)
Crude oil prices could drop by 40% by the end of the year as the U.S. government pulls back on its stimulus efforts, an energy analyst said Wednesday.
Phil Flynn, analyst for PFGBest, said at a midyear commodities outlook that the U.S. government's stimulus has artificially inflated crude oil prices by $20 to $30 per barrel. Prices have been trading around $75 this month.
"We should see the $40 handle by the end of the year," he said at a midyear Dow Jones Indexes-UBS commodity outlook conference. He later projected prices in a $44-$49 range.
Flynn said that assuming the Federal Reserve raises interest rates, crude oil prices might initially climb, as investors see it as a sign the economy is on the mend. But that reaction will then give way to bearishness in the crude market, as traders recognize that the pull-back of stimulus will strengthen the dollar.
Crude prices climbed close to $150 in 2008. Flynn said that rally was a sign of trouble in the economy, and that investors started to buy crude as a hedge against bank failures, which they expected to hammer the U.S. economy while sparing global markets. Analysts were less bearish on other commodities. Matt Zeman, a commodity futures broker with La Salle Futures Group, said that "financial mayhem" will continue to fuel prices in gold, which he said has become an alternative currency.
Problems in the European Union are going to persist, he said, and U.S. interest rates are going to remain at "exceptionally low" levels.
"People are going to be looking for something they feel safe with," he said.
Zeman projected average gold prices at $1,350 an ounce over the next year. On Tuesday, gold for August delivery settled up $9.80, or 0.8%, to $1,191.70 an ounce on the Comex division of the New York Mercantile Exchange.
In the grains markets, Price Futures Group Vice President Jack Scoville said he expects prices to continue in a broad sideways pattern for the foreseeable future.
"Generally good demand against good supplies means moderate prices, and that's what I expect to see," Scoville said.
Investors are generally pessimistic about the economy and are holding a lot of assets in cash "while they figure out what to do with their money," said Jon Fraade, managing director for UBS Securities LLC.
However, despite the low appetite for risk, there is "cautious buying" in commodities currently by pension funds, because they see more upside than downside in the markets, and because their level of investment is below a 3% to 5% benchmark.
The Dow Jones-UBS Commodity Index is down 9.66% so far this year.
Palm rebounds on hopes of good demand, weather concerns
JAKARTA, July 21 (Reuters) - Malaysian crude palm oil rose at midday, recouping the previous day's losses on expectations of good demand and that weather concerns in the U.S. will continue to support grain markets.
"Market fundamentals have not changed. We are moving in to Ramadan month, we still expect strong demand to come in," a trader at a foreign brokerage said.
Argentina says soyoil sales rise despite China row
BUENOS AIRES, July 20 (Reuters) - Argentine soyoil exports rose 65 percent in June from the same month last year despite a boycott by top buyer China that has halted shipments to the Asian country since April, the government said on Tuesday.
Argentina's government says it expects the trade row with China to be resolved in the near future, but there has been no clear sign of a deal and exporters have been forced to sell soybean oil elsewhere and at lower prices.
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