Tag Archives: crude oil tips

Supply disruptions in Copper, Platinum, Crude Oil and Grains possible: Barclays

1 Jun

Though the year so far has seen positive momentum when it comes to supply side of various commodities, Barclays does not expect the same to be the case as we move forward into the second half of the year. This applies to commodities like copper, platinum, crude oil and grains. Approaching the commodities one at a time would give us a better picture.

Copper

Monthly production data of copper from Chile, amongst the world’s biggest producers of copper, says that April saw the commodity declining in production by 1.2% y/y and 9% m/m. This is the first decline registered this year subsequent to an output growth of 7% y/y in Q1.

Platinum

There is an upcoming worker wage negotiation in South Africa with the political party of AMCU attending the talks for the first time. If the talks get protracted or a labour action stems from the same, supply disruptions may get to be the norm.

Crude oil

The Sudanese exports have been resuming slowly even as Yemen’s Marib pipeline has been repaired. But it may not be time for rejoicing as both developments are reversible. Yemen’s pipeline could be attacked yet again by the militants (“the frequency of pipeline attacks in Yemen have not faded and risk remains for a relapse”); nature of relationship between North and South Sudan being volatile, the crude oil flows may not be as reliable.

Besides the domestic conflicts and geopolitical factors are not favorable in Iraq, Libya and Nigeria.

Grains

Rain and wet weather have been playing dampeners as delays surface in US spring plantings of corn and soybeans.

 

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Three factors weighing on prompt month Crude Oil futures

18 May

Crude Oil refining margins remain lacklustre (weighed down by light product cracks in particular), with a few run cuts materialising in Europe. Refineries that have returned from maintenance are refraining from boosting utilisation rates, limiting the need to actively bid at the prompt.

—Asian refineries are at the height of their maintenance schedule, and with the prevailing compressed margins, Bank does not expect utilisation rates to surge as the maintenance season fades.

–A general reduction in non-OPEC shortfalls, with volumes from Sudan coming back, has helped relieve significant sources of stress in the supply system for now. However, other sources of geopolitical and technical challenges are emerging through the supply system.

The three factors mentioned above are weighing on the prompt month crude oil futures and should continue to do so, at least until the tail end of Q2; Barclays has noted in a report.

“At the prompt, we continue to see very few constructive elements across the demand-supply equation for crude oil. The OPEC basket price is also reflecting this weakness, briefly falling below the $100/bbl mark this week,” the bank report noted.

Overall, Barclays maintans its view that the short-term weakness in fundamentals is likely to fade as
the tail end of Q2 approaches.

On the demand side, the first indication to watch out for would be a recovery in petrochemicals in Asia.

However, such a pick-up is unlikely to be a straight line, in Barclays’ view. The naphtha market faces weight from oversupply and mild end-user consumption (in February and March, Chinese demand for the product fell by an average 3% y/y).

The supply side in Asia continues to be buoyed by incoming arbitrage volumes from Europe and the US on favourable east-west spreads. Around 1mt of heavy naphtha is expected to arrive in May for delivery in June (compared to typical flows of 0.6mt).

Compounding the weakness for naphtha cracks in the region, more supply is expected to come from Indian refiners as they boost exports as they emerge from maintenance season.

“The above factors will, in our view, be closely watched by other refineries in Asia as they emerge from maintenance, and a fair degree of tentativeness is likely to be exercised in boosting utilisation rates,” the Bank said.

“In our view, end-consumption for the olefins market (polyethylene, polypropylene, and styrenic resins) should pick up in June, buoyed by attractive prices and an improvement in manufacturing activity,” it added.

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Copper demand indicators for China turning positive: Barclays

4 May

High frequency end-demand indicators have started to pick up, the SHFE/LME import price arb has opened, SHFE stocks and bonded stocks have been falling, physical import premiums have been rising, and time spreads on the SHFE have gone into backwardation.

LONDON (Commodity Online): Whilst Barclays agrees that the demand environment remains soft for copper, there are signs that it is improving. All the usual copper demand indicators for China have been turning positive.

High frequency end-demand indicators have started to pick up, the SHFE/LME import price arb has opened, SHFE stocks and bonded stocks have been falling, physical import premiums have been rising, and time spreads on the SHFE have gone into backwardation.

“In our view, the sell-off may look overdone, but any price recovery is likely to be mild and difficult to sustain. We continue to favour selling into short-covering rallies in Q2,” said Barclays.

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In a move that may bring some much needed supply discipline in the aluminium market Alcoa has announced that it is considering closing 460Kt of production (11% of its capacity) in the next 15 months.

The company is reviewing higher cost plants given the weakness in prices. Alcoa confirmed that it already idled 568Ktpy in Texas, Tennessee, Italy, and Spain in 2012. Whilst this is a move in the right direction towards addressing the global surplus, it will not change the immediate supply-demand balance until cuts to production begin.

Barclays continues to see the market in >1Mt surplus this year, the seventh year of surplus with cuts so far doing little to address that. In China cuts of up to 700Kt have been largely offset by increased production in cheaper locations in the country leading to a still strong increase in net supply.

Negotiations of labour contracts at Freeport McMoRan’s 535Ktpy Grasberg copper mine in Indonesia get under way this month and already workers at three of its contractors have gone on strike.

Machinery repairs services workers at PT Jasti Pravita, PT Osato Seike and PT Srikandi Mitra Karya went on strike after failing to reach an agreement on a pay increase.

Freeport stated that “The strike for sure can slow down [Freeport Indonesia’s] operations, but we don’t expect any direct impact on our mining and production,” (Dow Jones). The last labour negotiations and resulting strike was in 2011 and lasted into 2012 resulting in 100Kt of lost production at the mine. We have been highlighting this year’s negotiations as a risk to this year’s copper production.

Source: http://www.commodityonline.com/news/copper-demand-indicators-for-china-turning-positive-barclays-54268-3-54269.html

Brent crude drops below $100 on weak data from China, US

2 May

Oil fell more than 2 percent to settle below USD 100 a barrel on Wednesday as soft economic data from China stoked pessimism about the global demand outlook and as US crude oil inventory rose to a record level.

Brent crude futures fell USD 2.42 to settle at USD 99.95 a barrel, after dipping below USD 99 during the session for the first time since April 23.

Crude stocks in the United States rose by 6.7 million barrels last week to a record 395.3 million barrels, data from the Energy Information Administration showed, far exceeding forecasts of a 1 million-barrel build and pressuring US oil prices.

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US oil settled down USD 2.43 at USD 91.03 a barrel. It hit a session low of USD 90.11, falling through its 50-day, 100-day, and 200-day moving averages.

“The market reared its head after we saw oil stocks jump to a three-decade high, and gasoline demand basically dropped to a decade low,” said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut.

Trading volumes were high, with Brent 14 percent above its 30-day moving average and US crude over 20 percent higher.

During the session, the spread between Brent and US crude narrowed to $8.39, the lowest since June 2012. It closed just below USD 9 for the second straight day.

The Brent contract slid 7 percent in April, its biggest monthly drop in 11 months, on the back of a series of indicators suggesting the global economy remains fragile.

Products prices also fell.

June RBOB fell 3 percent, or 8.3 cents, to settle at USD 2.72 a gallon, touching a session low of USD 2.69. June heating oil fell 5 cents, or nearly 2 percent, to settle at USD 2.79 a gallon, with a session low of USD 2.76.

DOUBTS ABOUT GROWTH

Growth in China’s manufacturing sector unexpectedly slowed in April as new export orders fell, raising new doubts about the strength of the economy after a disappointing first quarter.

“China’s manufacturing data was a big miss, and obviously when China speaks, we listen,” said Richard Ilczyszyn, chief market strategist and founder of iitrader.com LLC in Chicago.

In the United States, the pace of manufacturing growth slowed in April as the sector expanded only modestly, an industry report showed, adding to signs the economy cooled as the second quarter got underway.

Figures on US private-sector jobs growth also came in below market expectations, two days before the government’s closely watched non-farm payrolls data.

“The combination of ample supply and weak fuel demand levels with disappointing economic data wiped out USD 4 of market rebound in a couple of days,” said McGillian.

The US Federal Reserve said it will keep buying USD 85 billion in bonds each month to keep interest rates low and spur growth, but added it could lift or taper this pace of purchases depending on the economy’s path.

The European Central Bank is widely expected to cut interest rates to a record low of 0.5 percent after data showed inflation in the euro zone had fallen to a three-year low and unemployment had hit a record of 12.1 percent.

Oil market fundamentals showed plentiful supplies, which also pressured prices.

Supply from the Organization of the Petroleum Exporting Countries is forecast to average 30.46 million barrels per day (bpd)in April, up from 30.18 million bpd in March, a Reuters survey showed.

The Buzzard oilfield in the North Sea, an important contributor to the Brent crude benchmark, was on schedule to restart later on Wednesday, trade sources said, after a steam release caused the field to be shut down on Monday.

Source: Moneycontrol

Oil Edges up Slightly in Second Straight Day of Gains

20 Apr

Brent crude oil prices closed below USD 100 a barrel on a second day of modest gains on Friday, after surpassing USD 100 earlier in the session and recovering some ground after a steep six-day decline.

Brent has fallen nearly 10 percent since the beginning of April, a decline that accelerated earlier this week after a cut in oil demand forecasts by global energy agencies and weak economic data from the United States and China, the world’s two largest oil consumers.

Friday marked the second day of gains for Brent after it closed at USD 97.69 on Wednesday, the lowest level since July 2012 and a price that analysts said was attractive to bargain hunters.

Analysts said the market seemed to be stabilizing after a week of heavy liquidation in which prices tumbled from over USD 103 as of last Friday, along with a rout in gold and industrial metals.

“Today’s gains looked like a follow-up to yesterday’s correction and one that could possibly be maintained for a couple more sessions,” Jim Ritterbusch, president at Ritterbusch and Associates in Galena, Illinois, wrote in a research note.

Brent crude settled up 52 cents a barrel at USD 99.65, down from an intraday high of USD 100.33. US crude gained 28 cents to settle at USD 88.01.

The May US crude contract expires Monday, April 22.

Most USD  stocks rose on Friday, taking the oil complex with them. USD  equities back a day after the S&P 500 closed below its 50-day moving average for the first time this year, with help from some blue-chip tech names.

“This remains a market very much driven by the equity markets. They’ve been rebounding and we’re just knocking along with that,” said Kyle Cooper, managing director of research at IAF Advisors in Houston, Texas.

“Crude inventories are at an all-time high, but we’re up today,” he added. “There are some people who want to believe it’s a physical market, but it’s not. It’s a financial market.”

Yet worries about global demand and oversupply persist, and market participants remained cautious as to whether the recovery had legs. Front-month oil prices have fallen more than 3 percent for the week.
“Oil prices were technically oversold so we are seeing some buyers coming in but they are not great volumes,” said Rob Montefusco, an oil broker at Sucden Financial in London. “There is nothing to suggest we can go up on a sustained basis – we were just overdone on the downside.”

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After spending the week below 30 on the relative strength index (RSI), a technical momentum indicator, Brent crude poked its head above 30 on Friday.

A reading of 30 or below indicates an oversold condition to chart-watching traders.

Data released during the week contributed to falling prices. Chinese first-quarter GDP growth was seen as disappointing, down at 7.7 percent from 7.9 percent in the fourth quarter. In the United States, the number of people filing new claims for unemployment benefits rose last week, and factory activity in the nation’s mid-Atlantic region cooled in April.

Oil prices are down more than USD 10 a barrel from the start of this month. Brent touched its lowest level since July 2012 on Thursday at USD 96.75 a barrel after commodities took a hammering across the board earlier in the week.

Earlier in the week gold suffered its worst two-day fall in 30 years. Copper is still down below USD 7,000 a tonne, on course for its worst week since 2011.

But with the exception of industrial metals, the complex now appears to have stabilized. “There is a general feeling in the market that Brent won’t go much below USD 100 at this stage as a lot of speculative length has now been liquidated,” said Ole Hansen, head of commodity strategy at Saxo Bank.

The USD 100 level is seen as critical, because it is a budget breakeven point for OPEC members such as Iran, Iraq and Algeria.
“OPEC doesn’t want to see the price fall much below USD 100, and given that they continue to produce at very high levels, they can just turn the taps down a little bit, which would quickly change the balance in the market,” Hansen said.

Iran and Venezuela have already raised concerns about the price fall and said discussions had taken place over whether to call an emergency OPEC meeting before the group’s scheduled meeting at the end of May.

Source: moneycontrol

Gold hovers near 19-month low; bargain buying on

17 Apr

Indian gold futures edged lower on Wednesday, near their lowest level in more than 19 months, on losses in the global markets and a stronger rupee, triggering bargain buying among physical traders.

The actively traded gold contract for June delivery on the Multi Commodity Exchange (MCX) was 181 rupees lower at 25,585 rupees per 10 grams.

US gold for June delivery was 0.37 percent lower at $1,382.2 an ounce. The rupee, which firmed in trade on Wednesday, plays an important role in determining the landed cost of the dollar-quoted yellow metal.

“There are many buyers after consolidation in prices … sales will rise for Akshaya Tritiya,” said SK Jain, vice-president of All India Sarafa Association.

India, the world’s biggest buyer of the yellow metal, will celebrate Akshaya Tritiya, a key gold buying festival, next month. The wedding season has also begun and will continue till early June.

India has been trying to curb imports to put a lid on the record-high current account deficit. The federal government raised the import duty on gold, which it called a dead investment, by 50 percent to 6 percent in January.

On April 2, Finance Minister P. Chidambaram suggested the government was unlikely to raise the import tax on gold further to avoid gold smuggling.

May silver was 592 rupees lower at Rs 42,603 per kilogram.

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Source: http://www.moneycontrol.com/news/commodities/gold-hovers-near-19-month-low-bargain-buying-on_854157.html

Sell MCX Gold June Fut at Rs 28040: Fortune Financial

15 Apr

Fortune Financial Services has come out with its report on metals, Crude Oil and Natural Gas. The research firm says one can sell MCX Gold June Futures at Rs 28040 with stoploss above Rs 28400 for the target of Rs 27800-27600.

MCX Gold June futures contract is looking weak on chart, day traders can sell on small pullback Major support is seen in range of 27730, 27534 and 27283. While important resistance is seen near 28176, 28428 and 28623. (Sell at 28040, target 27800-27600 SL above 28400)

MCX Silver May futures contract is looking weak on chart, day traders can sell on small pullback Major support is seen in range of 48559 , 48216 and 47776 . While important resistance is seen near 49341 , 49781 and 50124. (Sell at 49300 Target 48200 SL above 49800)

MCX Natural Gas April futures contract is looking strong on chart, day traders can buy on small dips Major support is seen in range of 229.48 , 227.86 and 225.78 . While important resistance is seen near 233.18, 235.3 and 236.9.  (Buy at 229-227 Target 238 SL below 224)

MCX Crude Oil April futures contract is looking weak on chart, day traders can sell on small pullback Major support is seen in range of 4940, 4905 and 4861. While important resistance is seen near 5020, 5065 and 5099. (Sell at 5000 Target 4900 SL above 5070)

MCX Copper April futures contract is looking weak on chart, day traders can sell on small pullback Major support is seen in range of 401.67, 398.84 and 395.20. While important resistance is seen near 408.14, 411.8 and 414.6. (Sell at 410-412 target 398 SL above 416)

MCX Lead April futures contract is looking weak on chart, day traders can sell on small pullback Major support is seen in range of 110.27, 109.50 and 108.50. While important resistance is seen near 112.05, 113.0 and 113.8. (Sell at 113-113.5 Target 110 SL above 116)

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Source: moneycontrol