London: Oil fell $1 on Monday after forecasts projected Hurricane Dean would skirt to the south of the US Gulf of Mexico that is home to half of US refining capacity and pumps a third of its oil.
US crude was down 97 cents at $71.01 a barrel by 1452 GMT, erasing Friday's rally when the US Federal Reserve cut its discount rate to restore order to financial markets and as Dean menaced.
London Brent crude fell 65 cents to $69.79.
The US National Hurricane Center forecast Dean would remain south of the US portion of the Gulf and cross the Yucatan Peninsula en route to the east coast of Mexico."Barring a sudden northerly veering of the track of the storm, Gulf of Mexico production should be materially unaffected," Citigroup analysts said in a research note.
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But Mexico's Bay of Campeche, home to 70 per cent of Mexican oil output including the giant Cantarell field, was vulnerable to the storm, analysts noted. There are no significant refining operations in the area under threat, however.
Hurricane Dean, a Category 4 storm packing winds of 150 miles (241.4 km) was on a course that would take it very close to the east coast of the Yucatan peninsula later yesterday, the US National Hurricane Centre said. It could strengthen into a Category 5 hurricane within the next 24 hours.
US operators shut around 23,000 barrels per day (bpd) of oil output and 54 million cubic feet of natural gas.
Mexico's state oil company Pemex said it had begun evacuating more than 13,000 workers from rigs. It halted shipments of crude oil from the Gulf of Mexico port Dos Bocas as the hurricane approached.
Mexico is among the top crude suppliers to US refiners, with Mexican exports to its neighbour averaging 1.469 million barrels per day (bpd) this year.
Monday, August 20, 2007
Platinum, Palladium Climb in New York on Inflation Concerns
Aug. 20 (Bloomberg) -- Platinum in New York rose the most in 11 weeks on speculation that the dollar will slump against the euro, bolstering the metal's appeal as a hedge against inflation. Palladium also gained.
The price of platinum has climbed 9 percent this year, while the dollar dropped 2 percent against the euro. The U.S. currency fell on Aug. 17 after the Federal Reserve cut its discount rate to calm equity and credit markets and shifted away from cooling inflation.
``When the dollar weakens, precious metals gain because people are looking for a hedge against inflation,'' said Kirill Chuiko, an analyst with Uralsib Financial Corp. in Moscow. ``There is a lot of investment demand.''
Platinum futures for October delivery rose $15.80, or 1.3 percent, to $1,247.40 an ounce on the New York Mercantile Exchange. That marked the biggest percentage gain since May 31. The price reached a record $1,353.80 On May 7.
The euro climbed 0.4 percent against the dollar on Aug. 17, snapping a four-day slump, and was little changed today after paring gains.
Platinum is ``fundamentally sound and no longer grossly overinvested,'' Stephen Briggs, a metals analyst at Societe Generale in London, said in a report.
Palladium futures for September delivery rose $2.20, or 0.7 percent, to $331.95 an ounce. The metal is down 2 percent this year.
Platinum and palladium are used to make pollution-control devices for cars and trucks, and jewelry.
Palladium tumbled 7.9 percent last week, and platinum fell 3.7 percent.
Palladium ``may struggle to regain lost ground,'' because the market ``remains fundamentally well supplied,'' Briggs said.
The price of platinum has climbed 9 percent this year, while the dollar dropped 2 percent against the euro. The U.S. currency fell on Aug. 17 after the Federal Reserve cut its discount rate to calm equity and credit markets and shifted away from cooling inflation.
``When the dollar weakens, precious metals gain because people are looking for a hedge against inflation,'' said Kirill Chuiko, an analyst with Uralsib Financial Corp. in Moscow. ``There is a lot of investment demand.''
Platinum futures for October delivery rose $15.80, or 1.3 percent, to $1,247.40 an ounce on the New York Mercantile Exchange. That marked the biggest percentage gain since May 31. The price reached a record $1,353.80 On May 7.
The euro climbed 0.4 percent against the dollar on Aug. 17, snapping a four-day slump, and was little changed today after paring gains.
Platinum is ``fundamentally sound and no longer grossly overinvested,'' Stephen Briggs, a metals analyst at Societe Generale in London, said in a report.
Palladium futures for September delivery rose $2.20, or 0.7 percent, to $331.95 an ounce. The metal is down 2 percent this year.
Platinum and palladium are used to make pollution-control devices for cars and trucks, and jewelry.
Palladium tumbled 7.9 percent last week, and platinum fell 3.7 percent.
Palladium ``may struggle to regain lost ground,'' because the market ``remains fundamentally well supplied,'' Briggs said.
Gold, Silver Decline in New York on Reduced Investment Demand
Aug. 20 (Bloomberg) -- Gold and silver fell on speculation a slowing U.S. economy will reduce demand for precious metals.
The price of gold dropped 2.2 percent last week as the Dow Jones Industrial Average tumbled 1.2 percent. The Dow index fell as much as 0.7 percent today, erasing early gains. The U.S. Federal Reserve cut its discount rate on Aug. 17 to head off the rout in credit markets. Gold is still up 4.5 percent this year.
``The risk to the economy is on the downside,'' said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. ``People are looking for safe returns. Gold doesn't yield returns.''
Gold futures for December delivery fell 30 cents to $666.50 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price gained as much as 0.6 percent and dropped as much as 0.7 percent.
``Some traders see further losses waiting in the wings,'' Jon Nadler, an investment-products analyst at Montreal-based Kitco Minerals & Metals Co., said in an e-mail. ``Many people are highly skeptical that the Fed move has done anything but give people a chance to have a weekend respite.''
Silver futures for September delivery fell 6.5 cents, or 0.6 percent, to $11.735 an ounce. The metal is down 9.3 percent this year.
Some investors still may put money into gold should equities climb, said Tom Hartmann, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``If it appears the economy will recover, that will be supportive for gold.''
An stock rally may also sap demand for precious metals as an alternative investment, said Paul Walker, chief executive officer of London-based metals research firm GFMS Ltd.
``People are taking the view that an environment of lower interest rates is good for stocks,'' Walker said. ``If you take that view, people will put more cash into the stock market, and gold will not be a beneficiary.''
The price of gold dropped 2.2 percent last week as the Dow Jones Industrial Average tumbled 1.2 percent. The Dow index fell as much as 0.7 percent today, erasing early gains. The U.S. Federal Reserve cut its discount rate on Aug. 17 to head off the rout in credit markets. Gold is still up 4.5 percent this year.
``The risk to the economy is on the downside,'' said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago. ``People are looking for safe returns. Gold doesn't yield returns.''
Gold futures for December delivery fell 30 cents to $666.50 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, the price gained as much as 0.6 percent and dropped as much as 0.7 percent.
``Some traders see further losses waiting in the wings,'' Jon Nadler, an investment-products analyst at Montreal-based Kitco Minerals & Metals Co., said in an e-mail. ``Many people are highly skeptical that the Fed move has done anything but give people a chance to have a weekend respite.''
Silver futures for September delivery fell 6.5 cents, or 0.6 percent, to $11.735 an ounce. The metal is down 9.3 percent this year.
Some investors still may put money into gold should equities climb, said Tom Hartmann, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``If it appears the economy will recover, that will be supportive for gold.''
An stock rally may also sap demand for precious metals as an alternative investment, said Paul Walker, chief executive officer of London-based metals research firm GFMS Ltd.
``People are taking the view that an environment of lower interest rates is good for stocks,'' Walker said. ``If you take that view, people will put more cash into the stock market, and gold will not be a beneficiary.''
Most U.S. Stocks Rise for Third Day; Lowe's, Freeport Advance
Aug. 20 (Bloomberg) -- Retail, mining, and railroad shares carried most U.S. stocks to their third straight advance on growing confidence the Federal Reserve will assuage turmoil in credit markets and keep the economy growing.
Lowe's Cos., the second-largest U.S. home-improvement retailer, climbed the most in four years after its profit topped analysts' estimates. Freeport-McMoRan Copper & Gold Inc., the world's second-biggest copper producer, gained following a rally in metal prices. Union Pacific Corp., the largest U.S. railroad, posted its biggest one-day increase since March 2006 after UBS AG said it may be able to raise prices.
The Dow Jones Industrial Average rose 42.27, or 0.3 percent, to 13,121.35. The Nasdaq Composite Index added 3.56, or 0.1 percent, to 2,508.59. The S&P 500 slipped 0.39, or 0.03 percent, to 1,445.55. More than seven stocks climbed for every six that fell on the New York Stock Exchange.
``Investors are relieved that the Fed's becoming more proactive in dealing with the credit crisis,'' said Bruce Bent, who manages about $65 billion in assets as chairman of Reserve Funds in New York.
Today's advance added to the S&P 500's biggest rally in four years after the Fed lowered its discount rate on Aug. 17 and said it will ``act as needed'' to keep credit market losses from spreading. Yields on U.S. Treasury bills fell the most in two decades on speculation the Fed will cut its benchmark rate next month.
Lowe's
Lowe's rose $1.63 to $28.50 for the top gain in the S&P 500. The company added market share with better customer-service ratings and newer stores with brighter lighting and wider aisles. Second-quarter net income climbed 9 percent to 67 cents a share. Analysts predicted profit of 61 cents a share, the average of 17 projections compiled by Bloomberg.
Home Depot Inc., Lowe's larger rival, climbed 48 cents to $33.79.
Earnings at S&P 500 companies increased 10.7 percent on average in the second quarter, more than twice the estimate of analysts surveyed by Bloomberg at the beginning of the reporting period last month.
``The earnings scenario this quarter has been quite positive, but it's being completely overlooked by investors,'' said Eric Thorne, who manages $2.4 billion with Bryn Mawr Trust Co. in Bryn Mawr, Pennsylvania. ``There's some opportunity there for investors. The fundamentals are being overlooked.''
Freeport-McMoran advanced $3.06, or 4 percent, to $79.96 after copper futures gained for a second session, rebounding from a 6.1 percent drop last week.
Lowe's Cos., the second-largest U.S. home-improvement retailer, climbed the most in four years after its profit topped analysts' estimates. Freeport-McMoRan Copper & Gold Inc., the world's second-biggest copper producer, gained following a rally in metal prices. Union Pacific Corp., the largest U.S. railroad, posted its biggest one-day increase since March 2006 after UBS AG said it may be able to raise prices.
The Dow Jones Industrial Average rose 42.27, or 0.3 percent, to 13,121.35. The Nasdaq Composite Index added 3.56, or 0.1 percent, to 2,508.59. The S&P 500 slipped 0.39, or 0.03 percent, to 1,445.55. More than seven stocks climbed for every six that fell on the New York Stock Exchange.
``Investors are relieved that the Fed's becoming more proactive in dealing with the credit crisis,'' said Bruce Bent, who manages about $65 billion in assets as chairman of Reserve Funds in New York.
Today's advance added to the S&P 500's biggest rally in four years after the Fed lowered its discount rate on Aug. 17 and said it will ``act as needed'' to keep credit market losses from spreading. Yields on U.S. Treasury bills fell the most in two decades on speculation the Fed will cut its benchmark rate next month.
Lowe's
Lowe's rose $1.63 to $28.50 for the top gain in the S&P 500. The company added market share with better customer-service ratings and newer stores with brighter lighting and wider aisles. Second-quarter net income climbed 9 percent to 67 cents a share. Analysts predicted profit of 61 cents a share, the average of 17 projections compiled by Bloomberg.
Home Depot Inc., Lowe's larger rival, climbed 48 cents to $33.79.
Earnings at S&P 500 companies increased 10.7 percent on average in the second quarter, more than twice the estimate of analysts surveyed by Bloomberg at the beginning of the reporting period last month.
``The earnings scenario this quarter has been quite positive, but it's being completely overlooked by investors,'' said Eric Thorne, who manages $2.4 billion with Bryn Mawr Trust Co. in Bryn Mawr, Pennsylvania. ``There's some opportunity there for investors. The fundamentals are being overlooked.''
Freeport-McMoran advanced $3.06, or 4 percent, to $79.96 after copper futures gained for a second session, rebounding from a 6.1 percent drop last week.
Another Chance to Buy - By Timothy Silvers
Now is the time to buy more gold and silver if you have not yet done so. This article will be short and to the point as I am using a slow dial up internet connection in northern Pakistan (which is quite safe for travel, even for Americans, and has amazing mountains in every direction). I recommended on July 2 to buy silver and gold at those levels with a possible short term rally and possible other buying opportunity between the end of Aug and Oct. The other buying opportunity is here right now.
As global equities, commodities, and other assets sold off in reaction to the sub-prime bond fund debacle, gold and silver were pulled down with them. Traders needed to raise cash to make margin calls and the good was sold along with the bad. On August 16, gold dropped over $20 and silver was hit especially hard, getting knocked down over $1 to around the 11.50 level. Gold and silver seem to have found support now. Silver is at an RSI of 32.32 and gold at 46.18. On August 14, a few days before the large sell off, the Commitments of Traders report showed the commercial traders net short 46,432 silver contracts and the non-commercials net long 26,947 silver contracts. These are low numbers which should be even more favorable now that a large sell off has taken place.
Based on the RSI, commercial traders’ net short position, and summer seasonal weakness that I expected, silver is a strong buy right now. Gold is also good at these levels, and should be considered for your portfolio to protect against financial uncertainty. I am fully invested in bullion and buying more shares of quality mining stocks now. With the US housing correction showing no signs of ending, the full affects of the sub-prime lending fiasco still unknown, and many foreign equities markets still overbought, it is likely that there is some pain yet to be felt in the markets. Gold should protect you long term when the financial markets suffer inevitable shocks.
Silver is showing fairly high inventories on the COMEX of 134+ million ounces and the SLV silver ETF is showing 141+ million ounces in assets. These numbers would indicate that a supply crunch for silver is not imminent. One must also consider that silver is seen as more of an industrial, rather than precious metal. If the US falls into a recession this fall or winter of 2008, silver demand could be depressed and may have trouble gaining in price. Nevertheless, we are living in a very inflationary environment, as anyone buying food can tell you, and the US government seems to be printing money as if it grows on trees. This is good for gold and should be good for silver as well.
As global equities, commodities, and other assets sold off in reaction to the sub-prime bond fund debacle, gold and silver were pulled down with them. Traders needed to raise cash to make margin calls and the good was sold along with the bad. On August 16, gold dropped over $20 and silver was hit especially hard, getting knocked down over $1 to around the 11.50 level. Gold and silver seem to have found support now. Silver is at an RSI of 32.32 and gold at 46.18. On August 14, a few days before the large sell off, the Commitments of Traders report showed the commercial traders net short 46,432 silver contracts and the non-commercials net long 26,947 silver contracts. These are low numbers which should be even more favorable now that a large sell off has taken place.
Based on the RSI, commercial traders’ net short position, and summer seasonal weakness that I expected, silver is a strong buy right now. Gold is also good at these levels, and should be considered for your portfolio to protect against financial uncertainty. I am fully invested in bullion and buying more shares of quality mining stocks now. With the US housing correction showing no signs of ending, the full affects of the sub-prime lending fiasco still unknown, and many foreign equities markets still overbought, it is likely that there is some pain yet to be felt in the markets. Gold should protect you long term when the financial markets suffer inevitable shocks.
Silver is showing fairly high inventories on the COMEX of 134+ million ounces and the SLV silver ETF is showing 141+ million ounces in assets. These numbers would indicate that a supply crunch for silver is not imminent. One must also consider that silver is seen as more of an industrial, rather than precious metal. If the US falls into a recession this fall or winter of 2008, silver demand could be depressed and may have trouble gaining in price. Nevertheless, we are living in a very inflationary environment, as anyone buying food can tell you, and the US government seems to be printing money as if it grows on trees. This is good for gold and should be good for silver as well.
Asian stocks make sharp rebound
Asian stockmarkets rebounded sharply on Monday as worries about a credit squeeze were soothed and appetite for risk sharpened after the Federal Reserve on Friday to cut the discount rate by half a percentage point.
On Monday, central banks in Japan and Australia injected more money into the financial system to keep short-term interest rates under control.
Indonesian equities led the day, with the Jakarta Composite Index jumping 6.6 per cent. Indices in Singapore, Seoul, Hong Kong and Shanghai all rose by 5 per cent or more. In Japan the Nikkei rose 3 per cent to 15,732.48; exporters benefited as the yen weakened against the US dollar to Y115.46.
The MSCI Asia-Pacific Index of regional shares surged 4 percent, according to Bloomberg.
“Today there’s a huge sense of relief in equity markets,” said a senior trader in Singapore. “The rally may even extend for a few more days. But it may take a couple of months before we’re back to normal conditions.”
The Fed’s decision to make cheaper loans available directly to banks was welcome, he said, but added that when markets and economic conditions were this uncertain, “you don’t solve things in a few days.”
The Fed sent a signal to the markets that it would make sure the US financial system operated smoothly, said Adrian Mowat, chief Asian and emerging markets equity strategist at JP Morgan Securities in Hong Kong. He had been expecting tighter policy at the next Federal Open Markets Committee meeting; “now as a house we are forecasting the Fed will cut rates on September 18.”
The Bank of Japan injected another Y1,000bn into the money markets, repeating last week’s tactics, and the Reserve Bank of Australia added US$2.67 billion in cash.
Australian shares lagged some of the other big moves in the region. Nevertheless, the benchmark S&P/ASX 200 index closed the trading day 4.6 per cent higher at 5,932.6.
Financial and mining stocks advanced, having been some of the worst-affected sectors during last week’s turmoil.
On Monday, central banks in Japan and Australia injected more money into the financial system to keep short-term interest rates under control.
Indonesian equities led the day, with the Jakarta Composite Index jumping 6.6 per cent. Indices in Singapore, Seoul, Hong Kong and Shanghai all rose by 5 per cent or more. In Japan the Nikkei rose 3 per cent to 15,732.48; exporters benefited as the yen weakened against the US dollar to Y115.46.
The MSCI Asia-Pacific Index of regional shares surged 4 percent, according to Bloomberg.
“Today there’s a huge sense of relief in equity markets,” said a senior trader in Singapore. “The rally may even extend for a few more days. But it may take a couple of months before we’re back to normal conditions.”
The Fed’s decision to make cheaper loans available directly to banks was welcome, he said, but added that when markets and economic conditions were this uncertain, “you don’t solve things in a few days.”
The Fed sent a signal to the markets that it would make sure the US financial system operated smoothly, said Adrian Mowat, chief Asian and emerging markets equity strategist at JP Morgan Securities in Hong Kong. He had been expecting tighter policy at the next Federal Open Markets Committee meeting; “now as a house we are forecasting the Fed will cut rates on September 18.”
The Bank of Japan injected another Y1,000bn into the money markets, repeating last week’s tactics, and the Reserve Bank of Australia added US$2.67 billion in cash.
Australian shares lagged some of the other big moves in the region. Nevertheless, the benchmark S&P/ASX 200 index closed the trading day 4.6 per cent higher at 5,932.6.
Financial and mining stocks advanced, having been some of the worst-affected sectors during last week’s turmoil.
Oil and gas prices diverge as hedge funds cut bets
The movement of crude oil and natural gas prices in the past two weeks has caught the energy market by surprise as hedge funds liquidate their positions en masse and cause a sudden change in the directions the prices, analysts say.
In the midst of a global credit squeeze, hedge funds have been cutting many of their bets on gas and oil, according to the latest data from the US Commodities Futures Trading Commission, the market regulator. This has resulted in oil and gas prices moving sharply in opposite directions.
Hedge funds and other speculators were in late July putting their money on rising oil prices while expecting natural gas prices to fall.
Those positions were paying off before the credit market turmoil as oil prices rose to an all-time high in early August and gas prices fell to a six-month low. But as the credit squeeze intensified, speculators in need of cash began to unwind some of those profitable bets even as the fundamentals still supported the original positions.
The CFTC data also show, more broadly, that hedge funds have been significantly reducing their exposure to the energy markets.
Adam Robinson, energy analyst at Lehman Brothers in New York, says hedge funds are deciding to book profits in the energy market in order to offset losses in the equity and fixed income markets.
Many are also shrinking their outstanding positions to reduce leverage and exposure to risks to meet their margin calls needs, bankers and traders say.
Harry Tchilinguirian, senior energy analyst at BNP Paribas in London, says these hedge funds have been selling their “long” positions in oil – bets on prices rising – while buying back their “short” positions on natural gas – bets on prices falling.
In the midst of a global credit squeeze, hedge funds have been cutting many of their bets on gas and oil, according to the latest data from the US Commodities Futures Trading Commission, the market regulator. This has resulted in oil and gas prices moving sharply in opposite directions.
Hedge funds and other speculators were in late July putting their money on rising oil prices while expecting natural gas prices to fall.
Those positions were paying off before the credit market turmoil as oil prices rose to an all-time high in early August and gas prices fell to a six-month low. But as the credit squeeze intensified, speculators in need of cash began to unwind some of those profitable bets even as the fundamentals still supported the original positions.
The CFTC data also show, more broadly, that hedge funds have been significantly reducing their exposure to the energy markets.
Adam Robinson, energy analyst at Lehman Brothers in New York, says hedge funds are deciding to book profits in the energy market in order to offset losses in the equity and fixed income markets.
Many are also shrinking their outstanding positions to reduce leverage and exposure to risks to meet their margin calls needs, bankers and traders say.
Harry Tchilinguirian, senior energy analyst at BNP Paribas in London, says these hedge funds have been selling their “long” positions in oil – bets on prices rising – while buying back their “short” positions on natural gas – bets on prices falling.
Mexico clears oil rigs as hurricane nears
Mexican state oil company Pemex on Sunday evacuated thousands of oil workers from the Gulf of Mexico and warned it might close up to 2.2m barrels a day of crude oil production as the powerful hurricane approached.
Pemex said it was evacuating 13,360 workers – most of its workforce in the area - and that it might order the ”total closure of the oil wells” in the Cantarell oil field and other fields.
Pemex said it was evacuating 13,360 workers – most of its workforce in the area - and that it might order the ”total closure of the oil wells” in the Cantarell oil field and other fields.
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