Hedge Funds End Rout as Prices Reach Two-Month Low: Commodities (Bloomberg)
Hedge funds increased bullish bets on commodities for the first time in three weeks as prices dropped to a two-month low on signs of slowing Chinese growth and rising supplies of everything from crude oil to coffee. Money managers raised net-long positions across 18 U.S. futures and options by 0.2 percent to 1.24 million contracts in the week ended Oct. 2, Commodity Futures Trading Commission data show. They fell 6.6 percent in the previous two weeks. Silver wagers climbed to the highest in almost two years while bullish oil bets fell to a seven-week low. Gold holdings rose for a seventh week before prices reached an 11-month high.
Commodities retreated 4 percent since the Federal Reserve announced a third round of debt buying Sept. 13. While raw- material prices surged in the previous two rounds from December 2008 through June 2011, weaker growth and rising supplies are driving futures lower this time. Non-manufacturing industries in China expanded at the slowest pace in at least 18 months in September, European Union unemployment held at a record in August and U.S. crude output is the highest since 1996. “It’s harder to put money on the table right now in commodities,” said David Goerz, the chief investment officer at Highmark Capital Management Inc., which oversees about $17 billion of assets. “Commodities are increasingly focused on what’s happening in the fundamental economy, and China is a very big part of that. Overall, the real issue is whether the economy is able to strengthen.”
World food prices rise, stay close to crisis levels (CME)
World food prices rose in September and are seen remaining close to levels reached during the 2008 food crisis, the United Nations' food agency said on Thursday, while cutting its forecast for global cereal output.
DTN Closing Grain Comments 10/05 14:42 (CME)
Grains Mostly Lower Friday
The grain complex slid mostly lower during another quiet day. Contracts across the board closed well off session highs, setting the stage for weakness when trade resumes Sunday evening.
Pro Farmer: After The Bell Wheat Recap (CME)
Wheat futures closed lower today, with nearby Chicago contracts posting 10- to 11-cent losses to lead the decline. For the week, wheat futures posted sharp losses, but remained within the boundaries of the extended, choppy trading range. USDA will update its 2012-13 balance sheet for wheat, including the final 2012-crop production estimates from the Annual Small Grains Summary that was released Sept. 28.
Wheat Market Recap Report (CME)
December Wheat finished down 11 3/4 at 857 1/2, 15 1/4 off the high and 1 1/4 up from the low. March Wheat closed down 11 at 868 3/4. This was 1 1/2 up from the low and 14 1/4 off the high. December wheat closed 11 3/4 cents lower on the session and closed down 45 cents for the week. The close was a new low for the week as speculative sellers were active late. The market pushed under yesterday's lows and was trading down 8 cents on the day shortly after the pit opening. Weakness in the corn market plus sluggish export demand news plus talk of improving weather for the new crop into later next week helped to pressure. Traders see increasing chances of rain for the central and southern plains into late next week. Chicago wheat is weaker than Minneapolis or Kansas City. Ideas that wheat is already priced too high to attract feedgrain demand plus further weakness in corn today is helping to pressure. A weaker US dollar has been offset as a supportive force due to weakness in metal and energy markets.
December Oats closed down 3 1/2 at 367 1/4. This was 1/4 up from the low and 8 off the high.
Pro Farmer: After The Bell Corn Recap (CME)
Corn futures were little changed from last week's close as the market chopped sideways this week. Today, futures ended around 7 to 9 cents lower through the September 2013 contract, while far-deferred contracts were mostly 1 to 3 cents lower. Traders will ready positions for USDA's Crop Production Report next Thursday.
Corn Market Recap for 10/5/2012 (CME)
December Corn finished down 9 at 748, 10 1/4 off the high and 1 3/4 up from the low. March Corn closed down 8 3/4 at 748 1/2. This was 1 3/4 up from the low and 9 3/4 off the high.
December corn closed 9 cents lower on the session and closed down 8 1/4 cents for the week. A private forecaster pegged corn production at nearly 11.2 billion bushels as compared with the September USDA forecast at 10.727 billion and this was seen as a bearish force. The market pushed moderately lower on the day into the mid-session as traders see active harvest in the next week, poor demand for export and positioning ahead of next week's USDA Crop Production and Supply/demand report. News that South Korea bought corn from Russia is seen as a negative factor as South Korea has traditionally purchased US corn. However, both Black Sea and Brazil corn is moving at a discount to US corn and this has helped to pressure. Weekly export sales yesterday came in at just 326,900 tonnes as compared with 440,300 tonne average necessary each week to reach the USDA projection for the year. A bounce in soybeans provided some support for the market early but weakness in wheat, gold, energy markets helped to pressure. Traders see an active harvest weekend ahead. November Rice finished down 0.265 at 15.105, 0.005 off the high and equal to the low.
GRAINS: Chicago soybean futures edged higher building on the last two sessions of gains with support from a revival in U.S. exports and a surprise decline in estimates for Canada's canola crop. Corn edged higher, in line with the trend in soybeans, but the market is on track to finish the week nearly flat as the record pace of the U.S. harvest kept a lid on prices. (Reuters)
USGC sees record large 2012 China corn crop (CME)
By Thomson Reuters - Fri 05 Oct 2012 12:19:47 CT
China will produce a record large corn crop this year that, along with its existing stocks, would be sufficient to meet domestic demand, but the country could import supplies to build its reserves, the U.S. Grains Council said on Thursday after completing an annual crop tour.
India's Sept oilmeal exports down 64 pct yr/yr (CME)
By Thomson Reuters - Fri 05 Oct 2012 12:18:54 CT
India's oilmeal exports fell to 143,990 tonnes in September from 402,500 tonnes a year earlier, led by a sharp drop in the overseas sales of soymeal and rapeseed meal, a leading trade body said on Friday.
SOFTS: ICE Raw sugar futures on ICE eased off the previous session's eight-week high as upward momentum waned and the expected global surplus capped prices, while arabica coffee digested recent losses and cocoa was firm. (Reuters)
Top rubber producers set mechanism to prop up prices-source (Reuters)
The world's top rubber-producers, Thailand, Indonesia and Malaysia, have set up a support mechanism to intervene if rubber prices fall below $2.70 per kg, a Malaysian industry source told Reuters on Friday, in a bid to prop up prices.
U.S. Natural Gas Rises on Outlook for Colder Weather (Bloomberg)
Natural gas futures advanced for the seventh time in eight days as an expected blast of cold air signaled stronger demand for heating fuel. Gas gained 0.3 percent as the National Weather Service predicted below-normal temperatures for most of the lower 48 states over the next six to 10 days. Prices retreated from steeper gains after the Energy Department said supplies rose 77 billion cubic feet last week, above the median of 26 analyst forecasts showing an increase of 73 billion. “It’s a shoving match between the bulls and the bears,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “This is a seasonal play as supply is secured for the winter and speculators look to make end users pay up for it. You have so much supply in the ground so people are really bearish on the market rallies.”
Natural gas for November delivery gained 1.1 cents to settle at $3.406 per million British thermal units on the New York Mercantile Exchange after rising as high as $3.464. The futures have climbed 14 percent this year. November $3 puts, bets that prices will fall, were the most active gas options in electronic trading. They fell 0.7 cent to 1.7 cents on volume of 1,411 contracts as of 2:40 p.m. Puts accounted for 63 percent of options volume. The discount for November futures widened to 0.6 cent versus December contracts from yesterday to 27.4 cents. The low temperature in Detroit on Oct. 12 may be 37 degrees Fahrenheit (3 Celsius), 9 below normal, and New York City may drop 8 below the usual reading to 43 degrees, according to AccuWeather Inc. in State College, Pennsylvania.
Natural Gas Prices Hit Highest Level Since December (CME)
Temperatures Dip Below Normal, Especially in New England
Benchmark U.S. natural gas prices rose sharply for the second week in a row, reaching the highest levels since December amid cooler weather in New England, the Energy Information Administration said. Henry Hub gas as of October 3 was $3.21 per million British thermal units, up 29 cents, or almost 10%, from a week earlier. In midday NYMEX futures trading October 5, November gas fell 1.3 cents to $3.393, up 7.3 cents, or 2.2%, from the end of last week. On October 2, futures touched $3.546, the highest price for a nearby contract since early December. During the week ended October 2, U.S. gas demand fell 0.3% from the previous week, though consumption was up 6.9% from the same period in 2011. Average U.S. temperatures over the past week were about 3.4 degrees cooler than a year ago. Working natural gas in underground storage increased to 3.653 trillion cubic feet as of September 28, an implied net injection of 77 billion cubic feet from the previous week and 8% over year-ago levels.
Oil Drops a Second Day on Demand Outlook Amid Europe Debt Crisis (Bloomberg)
Oil fell for a second day in New York amid speculation Europe’s debt crisis will curb fuel demand. Futures slid as much as 0.3 percent after dropping for a third week on Oct. 5, the longest run of declines since June. European finance ministers meet in Luxembourg today to discuss Spain’s overhaul effort and closer banking cooperation. China’s economy may expand 7.7 percent this year, the slowest rate since 1999, according to the median estimate in a Bloomberg survey. Hedge-fund managers and other large speculators cut their bullish bets on oil in the week ended Oct. 2, a report showed. “The sentiment about demand may have a negative impact on prices with the global economic slowdown, particularly the concern over Spain and the recent growth revision in China,” Fahad Alturki, Riyadh-based senior economist at Jadwa Investment Co, said yesterday.
Crude for November delivery slipped as much as 28 cents to $89.60 a barrel in electronic trading on the New York Mercantile Exchange and was at $89.70 at 10:35 a.m. Sydney time. The contract dropped 2 percent to $89.88 on Oct. 5, the lowest close since Oct. 3. Prices slid 2.5 percent last week and are 9.2 percent lower this year. Brent oil for November settlement fell 39 cents to $111.63 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade’s premium to West Texas Intermediate was at $21.93, from $22.14 on Oct. 5. Hedge-fund managers cut their net-long position in oil by 11,590 contracts, or 6.52 percent, from a week earlier, according to data from the Commodity Futures Trading Commission on Oct. 5.
Recap Energy Market Report (CME)
November crude oil trended lower throughout the US trading session and back toward this week's low. Early pressure in the market came on disappointing European economic news and ideas that yesterday's 4.0% rally might have been overdone. November crude oil was able to pare some of its early morning loss in response to reports that showed the US unemployment rate falling to the lowest level since January 2009. However, those early gains dissipated and prices fell into new lows on the session. Some traders indicated that fears of slowing global growth weighing on demand kept the market under pressure. Additionally, talk of a new oil find off the coast of Mexico might have offered added downside pressure. November crude oil ended the week with a loss of 3.25%.
OIL- Oil slides below $112 ahead of U.S. jobs data
LONDON, Oct 5 (Reuters) - Oil slid below $112 per barrel as investors awaited data that is expected to show U.S. unemployment is on the rise, reinforcing concern that a fragile global economic recovery is still under threat.
"A bad non-farm payroll number would only likely have a negative impact on equity and commodities prices," said Jason Schenker, president of research firm Prestige Economics.
"It is unlikely the Fed would act significantly in the wake of having done so much at the September meeting."
U.S. off-line refining capacity seen rising - IIR
Oct 5 (Reuters) - U.S. oil refiners expect to have about 1.6 million barrels per day (bpd) of off-line capacity in the week ending Oct. 5, up from 1.43 million bpd the week before, data from research company IIR showed on Friday.
The firm expects off-line capacity to fall to 1.55 million bpd in the week ending Oct. 12.
Despite fiscal cliff, U.S. should not sell SPR
(John Kemp is a Reuters market analyst. The views expressed are his own)
LONDON, Oct 4 (Reuters) - Now that domestic oil production is rising and imports are falling, should the United States reduce the amount of emergency oil it holds in giant salt caverns along the coast of Louisiana, or at least switch from stockpiling crude to holding refined products like gasoline, jet fuel and diesel?
"The United States will soon start selling oil from its Strategic Petroleum Reserve (SPR)," predicted leading energy analyst Phil Verleger in a thought-provoking article for "Petroleum Intelligence Weekly" last month ("Major SPR oil sales likely over next few years" Sep 17).
Oil prices lower for third week in a row (CME)
By Dominick Chirichella - Sun 07 Oct 2012 05:27:13 CT
The second half of last week was laden with volatility as the oil market reversed direction several times. The battle between the slowing global economy and thus potential for a further slowing of oil demand growth versus the potential impact of money printing from central banks around the global as well as the impact of the recent rash of refinery issues that has resulted in gasoline shortages in California accompanied by surging retail gasoline prices. Sprinkled over the aforementioned price battle line is the ever evolving geopolitical risk in and around the middle east in particular Iran's nuclear program.
Crude oil prices declined for the third week in a row (see below for a more detailed discussion) as concerns over the slow growth global economy dominated all of the other price drivers last week. The biggest loser in the oil complex was WTI as the balances in the US are still biased to the surplus side for crude oil even though there are gasoline issues on the West Coast. The vast majority of macroeconomic data released last week from around the world was biased to the bearish side for oil and most risk asset markets as most of the date continued to support the slow growth viewpoint.
Even the US jobs picture was not all that supportive even though the headline unemployment rate dropped to 7.8% as only 114,000 new jobs were created in September or well below what is needed to keep up with the normal population growth in the jobs market let alone enough to impact the huge number of Americans still out of work. The jobs report is symptomatic of a slowing economy in the US. Moving over to China the data has continued to suggest the main economic growth engine of the world is also slowing. Last week the Golden week holiday... a major retail sales week in China... was also a bit disappointing with retail sales increasing by about 15% versus last year's Golden week which showed an increase in retail sales of close to 18%. Not a major absolute difference but the trend is indicative of a slowing of this economy. A slowing of China's economy will directly impact and result in a slowing of oil demand growth going forward.
Although there are no shortages of oil from any of the evolving geopolitical issues in the middle east these issues are bubbling up from many different locations. In just the last several days there are now conflicts at the Syrian/Turkey border and an unmanned drone was shot down over Israel this weekend (thought to be an Iranian drone). The overall tensions throughout the middle east are continuing to increase and thus the risk of a supply disruption is also increasing ...especially if there is an overreaction by any of the main players in the region...Israel or Iran in particular.
The oil complex ended the week lower... with the exception of RBOB gasoline... as shortages of gasoline have emerged in California as a result of refinery outage related shortages. WTI declined the most of everything in the oil complex even after a surprise draw in crude oil stocks for the second week in a row. WTI decreased by 2.51% or $2.31/bbl as Brent held up significantly better decreasing by only 0.33% or $0.37/bbl. Crude oil stocks in PADD 2 were modestly higher while Cushing inventories increased by about 135,000 barrels on the week. The Nov Brent/WTI spread widened significantly on the week by $1.94/bbl as the normalization process is only slowly proceeding. In fact the spread is currently trading at the highest level in months as the North Sea is still experiencing a slow recovery from maintenance.
On the distillate fuel front the Nymex Nov HO contract decreased by 0.1% or $0.0033/gal on the week as distillate fuel inventories decreased modestly on the week. Gasoline prices increased strongly on the week. The Nov Nymex gasoline price increased by 1.11% or $0.0324/gal this past week.
Nat Gas futures were strong during the first half of the week and enough to end the week in positive territory. The November Nat Gas futures contract increased by 2.29% or $0.076/mmbtu on the week and is solidly trading above the key psychological level of $3.00/mmbtu as the market continues to be focusing on the upcoming winter heating season.
In spite of moderating temperatures forecast in the latest NOAA six to ten day and eight to fourteen day projections the spot Nat Gas futures market is holding up relatively well with prices hovering either side of unchanged throughout the session so far. The market is clearly in a winter heating season thinking mode. It would seem that in spite of the lack of strong nearby fundamental support market players are moving their focus to the perception mode of what the winter heating season may portray for upcoming Nat Gas demand. As I have been indicating I still believe that the market will need strong fundamentals for an extended period of time for prices to rally strongly from current levels and for the rally to last for a sustained period of time.
From a technical perspective the spot futures contract remains below the breakout level or new resistance area from the inverted head and shoulders pattern discussed earlier this week. at the moment the market still has the possibility of testing the next technical support level of around $3.20/mmbtu. For the moment the technicals remain biased to the downside.
On the financial front equity markets around the world were mostly higher for the week as market participants continued to digest the new solution presented by the ECB along with QE3 by the US both of which are viewed as actions that will bolster the global economy. The increase in equities were mostly a result of the view that all of the money printing by central banks around the globe will have a positive impact on the global equity markets. Global equity values increased as shown in the EMI Global Equity Index table below but are still solidly in positive territory for the year.
The EMI Index increased by 0.3% on the week with the Index now showing a year to date gain of 7.0%. Over the last week the Index increased in value in most all of bourses with just one bourse remaining in negative territory for the year... China. Over the last several months the global equity markets have been struggling to stay in positive territory but the perception of what the new rounds of global easing might do to the global economy has moved market participants back into a risk on trading sentiment.
The euro was higher on the week while the US dollar was lower. Last week the global equity markets were a neutral to bullish price driver for oil and most commodity markets for most of the week's trading sessions.
The oil complex has breached all of its current support levels and as such I am keeping my view at neutral for today with an eye toward the bearish side if the correction continues further. The battle continues between the negativity from the slowing of the global economy compared to what global stimulus programs might do to the economy going forward while geopolitics has moved toward the background for the short term.
I am keeping my Nat Gas price view at neutral with a neutral bias as the market seems to entering a downside correction mode. Even though current prices favor coal over Nat Gas (based on a macroeconomic comparison) the market is now more focused on the upcoming winter heating season and what it may due to Nat Gas demand.
Copper Futures Drop in Commodity Slump Paced by Energy (Bloomberg)
Copper futures fell for the second time in three days as commodities tumbled, spurred by slumping energy prices. The Standard & Poor’s GSCI Spot Index of 24 raw materials fell as much as 1.4 percent. Crude oil headed for the third straight weekly decline, the longest slump in four months, on signs of ample supplies. Most industrial metals traded in London dropped. “With oil weakening, it spills over,” Edward Meir, an analyst at FCStone Inc. in New York, said in a telephone interview. “Many of the funds trade in baskets of commodities, and when they see oil falling, they get nervous. Oil is sort of the locomotive because it’s such an important commodity.” Copper futures for December delivery declined 0.2 percent to settle at $3.778 a pound at 1:21 p.m. on the Comex in New York. The price climbed 0.5 percent this week. More signs this week of a slowing economy in China, the world’s biggest metal user, may weaken copper, Meir said.
On the London Metal Exchange, copper for delivery in three months fell 0.1 percent to $8,295 a metric ton ($3.76 a pound). Tin, lead, nickel and aluminum dropped, while zinc rose.
Silver Market Recap Report (CME)
Like gold, the December silver contract forged a rather extensive trading range today of roughly 83 cents an ounce. Also like gold, silver seemed to flirt with the prior session's high but then came under liquidation pressure in the wake of the down tick in the US unemployment rate. While silver hasn't paid that much attention recently to South African mining turmoil, that news could begin to influence platinum and gold prices more significantly ahead and that in turn could mean that outside market action in the metals might have more of a daily impact on silver prices.
Gold Falls From Highest Since November on Jobless Data (Bloomberg)
Gold futures fell from the highest in almost 11 months after the U.S. unemployment rate unexpectedly dropped, easing pressure on the Federal Reserve to expand monetary stimulus. Silver also slid. The jobless rate in September declined to 7.8 percent from 8.1 percent, government data showed today. Earlier, gold reached a 10-month high close to $1,800 an ounce on speculation that stimulus programs in the U.S., Europe and Japan enhanced the appeal of the metal as an alternative to currencies. “People are throwing in the towel,” Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Investors are now speculating on how long the third round” of qualitative easing will continue in the U.S., he said. Gold futures for December delivery fell 0.9 percent to settle at $1,780.80 at 1:44 p.m. on the Comex in New York. Prices earlier touched $1,798.10, the highest for a most-active contract since Nov. 9, and gained 0.4 percent this week.
The unemployment rate, derived from a survey of households, was forecast by analysts to rise to 8.2 percent. Silver futures for December delivery declined 1.5 percent to $34.572 an ounce. Yesterday, the metal closed at the highest since March 1. Silver has jumped 24 percent this year, while gold advanced 14 percent. Platinum futures for January delivery retreated 1 percent to $1,707.20 an ounce on the New York Mercantile Exchange, ending an eight-session rally. Palladium futures for December delivery slumped 1.7 percent to $663.20 an ounce on the Nymex.
Gold Market Recap Report (CME)
The December gold contract forged a rather significant trading range today of roughly $24 an ounce. Gold was in favor at times as the December gold contract at times returned to the vicinity of the prior session's high before giving ground off what appeared to be declining US easing prospects. The gold market might have been technically overdone after the gains forged earlier in the week but the gold market might also be able to benefit from ongoing violence in the mining sector in South Africa directly ahead. Some traders suggested that respect for the $1,775 level in the December gold contract in the post payroll report washout could make that level a critical pivot point in the coming sessions.
