ICE Expanding Default Fund as Risk, Volatility Climb (Source: Bloomberg)
ICE Futures U.S., home to markets for commodities including sugar, cotton and orange juice, said it will increase the size of a fund created to protect members against trading defaults after an increase in volatility and risk during the past year. The so-called Guaranty Fund, which is supported by surcharges on trading, will increase to a minimum of $250 million from $215.89 million, the exchange said today in a statement. The fund is designed to cover the greatest potential loss at any one clearing member given the largest historical price move in any one commodity, it said. The exchange uses margin deposits and position limits by the clearing house to reduce default risk, while the Guaranty Fund provides additional protection against “extreme market conditions,” Brookly McLaughlin, a spokesman for ICE, said in the statement. McLaughlin, contacted by e-mail, declined to elaborate on how the change will affect margin requirements or trading fees.
Commodities Close to Erasing 2012’s Gains on Europe, U.S. Data (Source: Bloomberg)
Commodities fell for a fourth straight session, nearly erasing this year’s gains, after elections in France and Greece showed voters rejecting austerity and fueled concern that raw-material demand will slow. The Standard & Poor’s GSCI Spot Index had its worst run since August, losing as much as 1.3 percent to 645.29, the lowest level since Dec. 30. The gauge, which tracks 24 raw materials, settled down 0.2 percent at 4:04 p.m. in New York, paring gains this year to 1.1 percent. Crude oil fell as much as 3.2 percent to $95.34 a barrel, the lowest since Dec. 20. Commodities retreated in March, April and this month on concern that the European debt crisis may endanger the global recovery. Slowing expansion in China and worse-than-expected job growth in the U.S. also spurred declines. In March, Goldman Sachs Group Inc. cut its three-month commodities outlook to neutral, warning that economic growth was likely to soften.
“The market is not happy with the sudden increase in uncertainty,” said Jeremy Friesen, a commodity strategist at Societe Generale SA, referring to the election outcomes in Europe. “We expect China to continue to weaken near term, the U.S. is still going through this funk, Europe is in recession, and now you overlay some policy uncertainty.” Crude-oil futures for June delivery fell 0.6 percent to settle at $97.94 on the New York Mercantile Exchange. Energy, including crude oil, gasoline and natural gas, accounts for 70.5 percent of the S&P GSCI, according to weightings on Standard & Poor’s Ratings Services’s website for Dec. 30. Most markets in London are closed today for a holiday.
Hedge Funds Bet Wrong Before Biggest Slump Since October (Source: Bloomberg)
Hedge funds raised bets on higher commodity prices for the first time in six weeks, just before the biggest three-day slump since October as U.S. jobs data fell short of expectations and European manufacturing contracted. Money managers increased net-long positions across 18 U.S. futures and options by 6.9 percent to 895,240 contracts in the week ended May 1, the biggest gain since Feb. 28, Commodity Futures Trading Commission data show. Bullish copper wagers surged sevenfold before prices fell for three days, and soybean bets reached the highest since at least June 2006 as the oilseed capped the biggest weekly loss since mid-January. The Standard & Poor’s GSCI Spot Index of 24 raw materials tumbled 4.9 percent in the three sessions ended May 4, the most since Oct. 4. Reports showed last week that services and manufacturing output shrank last month in the euro region and the U.S. added fewer jobs than forecast in April.
Open interest, or contracts outstanding, across commodities fell 2 percent in the seven sessions through April 30, the longest slide since November, data compiled by Bloomberg show. “We had some soft data points along the edges that’s taken some of the steam out of the market,” said Kelly Wiesbrock, who helps manage $1.3 billion of assets for San Francisco-based hedge fund Harvest Capital Strategies. “It’s hard to know whether this is a just a little bit of a pause, or if this is something bigger.”
Exports fuel speculative buying in corn, soy-CFTC
CHICAGO, May 4 (Reuters) - Large speculators raised their net long position in Chicago Board of Trade corn futures and options, breaking a five-week streak of cuts to the position, as surging export demand threatened to further tighten up the U.S. supply situation, regulatory data released on Friday showed.
The speculators also added to their net soybean long, raising it to a fresh record high as prices rose 2.5 percent due to stepped-up purchases from top buyer China.
Wheat Market Recap Report (Source: CME)
July Wheat finished up 2 1/2 at 612, 2 off the high and 11 1/4 up from the low. December Wheat closed up 3 at 651. This was 11 3/4 up from the low and 1 3/4 off the high. July wheat closed moderately higher on the session and up sharply from the early lows. Bearish outside market forces helped to pressure the market early but the market stayed moderately lower on the day into the mid-session even with a solid recovery in the US stock market and a set-back from the highs for the US dollar. Weakness in corn and soybeans added to the negative tone. Ideas that the Crop Production and Supply/demand updates on Thursday could bring some bearish supply news plus more rain in the forecast for the southern plains helped to pressure the market. Selling was limited by news from the COT report on Friday of a short-covering trend last week from fund traders who still held a hefty net short position. Weekly export inspections came in at 24.07 million bushels which was higher than expected and compares with just 16 million necessary each week to reach the USDA projection. Wheat stocks in Canada on March 31st fell to 14.5 million tonnes which at the low end of expectations and compares with 15.8 million tonnes last year. The rally in the corn market to higher on the day helped spark some short-covering in wheat and this helped to provide for the buying support to close higher. For the report on Thursday, traders see winter wheat production near 1.64 billion bushels as compared with 1.494 billion last year. All wheat production is expected near 2.195 billion bushels as compared with 1.999 billion last year. For ending stocks for the 2011/12 season, traders see stocks near 780 million bushels as compared with 793 million posted in the April update. For the 2012/13 season, traders see ending stocks near 785 million bushels but with a range of near 600-925 million bushels. July Oats closed down 2 1/2 at 337 1/2. This was 2 up from the low and 2 1/4 off the high.
Market Recap: Wheat Futures (Source: CME)
Chicago wheat futures staged a recovery into the close to finish 2 to 3 3/4 cents higher and Kansas City futures ended mostly around a nickel higher. While the winter wheat markets ended near session highs, Minneapolis futures closed low-range with losses of 4 3/4 to 10 1/2 cents. Wheat futures were pressured for much of the session by negative outside markets as investors reacted to disappointing election results in Europe, primarily Greece.
Heavy rain boosts western Europe wheat crop outlook
LONDON, May 4 (Reuters) - Heavy rain across western Europe in the last few weeks has improved the outlook for wheat crops following a prolonged dry spell although it may heighten the threat posed by disease.
"We needed this rain. There had been a serious concern about a drought until a couple of weeks ago, and now plants should not have any problems," Paolo Abballe, grain expert at Italy's biggest farmers association Coldiretti, told Reuters.
GRAINS-US grains drop on risk aversion after Greece, France polls
SYDNEY, May 7 (Reuters) - U.S. grain futures dropped as investors fled riskier assets, after Greek and French polls stoked concerns on whether struggling euro zone economies could continue to pursue austerity measures crucial to resolving the bloc's debt crisis.
"Today we are seeing some risk aversion in the grains market due to political risk emanating out of the euro zone, and on Friday we that saw employment numbers in the U.S. is weakening," Lynette Tan, an analyst at Phillip Futures in Singapore said.
POLL-China 2012/13 corn imports seen climbing 60 pct
BEIJING/SINGAPORE, May 7 (Reuters) - China's corn imports are likely to jump almost 60 percent in the year to September 2013, turning it into the world's fourth-largest buyer as Beijing strives to supply livestock feed to meet fast-growing demand for meat and cool near record prices.
The world's second-biggest consumer and producer of corn is projected to buy 7.9 million tonnes in 2012/13, up from an estimated 5 million tonnes this year, according to a Reuters survey of 10 analysts and traders.
Corn Market Recap for 5/7/2012 (Source: CME)
July Corn finished down 1/4 at 620, 1 1/4 off the high and 7 3/4 up from the low. December Corn closed up 1/2 at 524 3/4. This was 9 3/4 up from the low and 2 off the high. July corn closed just 1/4 of a cent lower but well up from the early lows. The strong cash market supported a higher close for the May corn. Ideas that the weather outlook is favorable and that the USDA will release high production, yield and ending stocks estimates in their first supply/demand update for the 2012/13 season on Thursday morning helped to pressure the market early and also helped to push December corn down to match Friday's lows at 515. December corn closed higher on the day. Traders see corn plantings as of Sunday (for release this afternoon) near 67% complete as compared with 53% last week. Weekly export inspections came in at 29.3 million bushels which was about as expected and this compares with 31.2 million necessary each week to reach the USDA projection. Strong cash markets continue to help support the May contract with historically high basis bids, record wide May/July inversion and a lack of deliveries against the May contract helping to support. South Korea passed on a tender to buy 55,000 tonnes of corn at a tender indicating prices were too high. For ending stocks for the 2011/12 season, traders see stocks near 750 million bushels as compared with 801 million posted in the April update. For the 2012/13 season, traders see ending stocks near 1.71 billion bushels but with a range of near 1.2 billion to well above 2 billion bushels. July Rice finished up 0.01 at 15.215, equal to the high and 0.115 up from the low.
Market Recap: Corn Futures (Source: CME)
After posting losses throughout the session, corn futures staged an impressive rally into the close to finish narrowly mixed. Early pressure came from uncertainty about the economic future of Europe after some key leadership changes in Greece and France. But as the session wrapped up, traders recognized that outside markets had reacted relatively quietly to the news and the stock market had even turned higher.
Traders sizing up new crop corn potential
--Gavin Maguire is a Reuters market analyst. The views expressed are his own.--
CHICAGO, May 4 (Reuters) - The prospect of a near record amount of corn plantings this spring has placed December corn futures under sustained pressure in recent weeks, with the December 2012 contract down more than 10 percent since the beginning of the year and more than $1.40 a bushel off its all-time high seen in late August of last year.
The relentless downward grind in prices for the past month or so suggests many market participants are buying into the notion that the newly planted corn will thrive under crop-friendly conditions throughout the coming months.
Brazil coffee gets moisture top up, outlook unclear
BRASILIA, May 4 (Reuters) - Brazil's coffee zones received good rainfall this week, weather forecaster Somar said in a coffee bulletin on Friday, which will go some way to compensating for weeks of unusually dry weather that producers fear could limit yields.
The world's top coffee grower is only a few weeks from harvesting its larger on-year crop, the higher-output half of a biennial up-down cycle, that traders are awaiting to top up supplies of quality arabica as demand outstrips supply growth.
Sugar users want swift end to EU production limits
BRUSSELS, May 4 (Reuters) - Europe's leading industrial sugar users have urged policymakers not to delay proposals to end EU sugar production limits from 2015, blaming the quota system for a shortage of the sweetener in Europe.
In October the EU's executive, the European Commission, proposed abolishing national production quotas, which currently limit annual sugar output to 13.8 million tonnes, compared with annual consumption of about 16.5 million tonnes.
Mexico publishes 250,000 T sugar import quota
MEXICO CITY, May 4 (Reuters) - Mexico published in its official gazette on Friday a 250,000-tonne sugar import quota for 2012 after a severe drought damaged some crops.
Under a trade deal, 10 percent of the quota is assigned to Nicaragua and the rest will come from the international market. The economy ministry said earlier in the year it was considering the quota, but industry sources said the entire amount may not need to be imported.
Record Gas Use by U.S. Utilities Fails to Drive Up Price: Energy (Source: Bloomberg)
U.S. utilities led by Southern Co. (SO) are burning a record amount of natural gas for generating electricity without triggering a forecasted boost to the fuel’s price from near 10-year lows. The power companies used 34 percent more gas in February than a year earlier, Energy Department data show. Even Atlanta- based Southern, historically one of the largest U.S. coal-plant operators, is on pace to consume more of the cleaner-burning fuel than coal in 2012 for the first time in its 100-year history. Utilities are the nation’s biggest gas consumers. The historic switch to gas is set to peak this year without fulfilling industry predictions that it would eat up inventory and drive up gas prices. That’s because unparalleled output from new shale fields is oversupplying the $95 billion U.S. gas market, postponing relief for hundreds of producers.
Record gas use “may not be the panacea that people think” it will be, Jason Schenker, president of Prestige Economics LLC, based in Austin, Texas, said in a telephone interview. Schenker was the fourth-best predictor of gas prices in the first quarter, according to data compiled by Bloomberg.
Euro Coal-ARA prices tick higher, China on sidelines
LONDON, May 4 (Reuters) - European coal prices crept higher by 25 cents a tonne on Friday as the market steadied after hitting two-year lows earlier in the week on weakening fundamentals.
The high level of U.S. thermal coal exports - likely to be around 45-50 million tonnes this year combined with rising Colombian exports has led to oversupply in Europe, but only because the expected demand from China and India to absorb the surplus has not yet materialised.
Day-to-day oil price stability a conundrum
--John Kemp is a Reuters market analyst. The views expressed are his own--
LONDON, May 4 (Reuters) - With just over a third of the year gone, 2012 has already proved tumultuous for the oil market, with front-month Brent futures trading as low as $108 per barrel and as high as $128.
There has been no lack of big news and surprises: civil war in Syria, the eruption of trouble in South Sudan, the rise and fall of tensions with Iran, endless production problems in the North Sea and speculation about the release of emergency stocks by the United States and its partners in the International Energy Agency (IEA).
Japan eyes guarantees for ships carrying Iran oil-Nikkei
TOKYO, May 7 (Reuters) - Japan is considering a new law to provide sovereign guarantees for its ships to allow them to continue importing Iranian crude oil after EU sanctions come into effect in July, the Nikkei business daily said.
The European Union has already prohibited European insurance coverage on hull and machinery for Iranian crude shipments, which has significantly limited Japan's lifting of Iranian crude from April.
Brent falls below $113 on global demand worries
SINGAPORE, May 7 (Reuters) - Brent crude fell below $113 a barrel, hitting its lowest since January, as political uncertainty in Europe that threatened to derail efforts to rein in the region's debt crisis and weak U.S. jobs data dented the outlook for energy demand.
"There are great fears that the new government in Greece will end austerity measures and that will lead to a disorderly default, and that has led to a sell-off across all risk markets," said Ben Le Brun, a market analyst with OptionsXpress in Sydney.
Oil Trades Near Three-Month Low as Supplies Seen Rising (Source: Bloomberg)
Oil traded near the lowest level in three months in New York before a government report that may show crude stockpiles rose to the highest in more than 21 years in the U.S., the world’s biggest consumer of the commodity. Futures were little changed after slipping for a fourth day yesterday. U.S. supplies climbed 1.9 million barrels to 377.8 million last week, according to a Bloomberg News survey before an Energy Department report tomorrow. That would be the highest level since September 1990 and the seventh weekly increase, the longest run since April 2010. Crude for June delivery was at $98.08 a barrel, up 14 cents, in electronic trading on the New York Mercantile Exchange at 9:07 a.m. Sydney time. The contract yesterday slid 55 cents, or 0.6 percent, to $97.94, the lowest close since Feb. 6. Prices are down 0.8 percent this year.
Brent oil for June settlement dropped 2 cents to $113.16 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark contract’s premium to West Texas Intermediate closed at $15.22.
Copper Futures Seen Rallying 11% on Fibonacci Retracement (Source: Bloomberg)
Copper prices, which gained the most in a week yesterday, may climb to $4.20 a pound for the first time since September, according to technical analysis by Paul Kavanaugh, a senior trader at PFGBest. The futures contract for July delivery will rise 11 percent if prices on the Comex in New York top the 50 percent Fibonacci retracement level of $3.803 within a couple of trading sessions, Kavanaugh said in a telephone interview yesterday. The metal closed yesterday at $3.7735, rising 1.4 percent, the biggest gain since April 26. Prices still are down 1.5 percent in May, heading for the biggest monthly decline of the year. “It is encouraging to see that copper is trying to claw back,” Kavanaugh said, noting that the 100 percent Fibonacci retracement level is $4.526. “In the short term, we will see some strength.”
Copper prices still are up 9.8 percent this year, partly on expectations that global demand will exceed mine output. PNB Paribas increased its forecast for a production deficit in 2012 to 400,000 metric tons on May 4 from an earlier estimate of 300,000 tons. In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.
Indonesia tax on metals risks China shipments
JAKARTA/HONG KONG, May 4 (Reuters) - New Indonesian taxes on metals and curbs on raw mineral shipments are likely to hit exports of nickel and bauxite to China and push ore prices higher on world markets, an industry source said on Friday.
The government of Southeast Asia's biggest economy aims to boost investment in domestic ore processing to lift exports of higher-value finished metals. The new rules come into force on Sunday.
Iron Ore-China steel sags to 2-month lows, ore falls
SINGAPORE/SHANGHAI, May 7 (Reuters) - Shanghai rebar steel futures fell to their weakest in more than two months on Monday as slow demand in top market China kept prices under pressure, prompting sellers of raw material iron ore to cut prices.
The fall in rebar futures also tracked weakness across commodity and equity markets as French and Greek elections led to more uncertainty for an economically fragile region and fuelled a resurgence of bearish sentiment for risk assets that emerged after last week's U.S. jobs data.
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