Views on commodities and energy
Gold comes off but oil futures work to recoup $100 and at least one commodities-linked exchange is outperforming as central banks pump money into distressed markets. (Toronto’s benchmark stock index is rising over 2% at this moment. No such luck in Australia overnight and the reeling Russian market remains shuttered)
Still the banks crisis remains a potent presence. Energy trading heavyweight Morgan Stanley elected to withdraw from the Platts benchmark oil trading window in Asia on Thursday, steering clear of a possible test of its credit acceptance among counterparties.
The Australian picks up on a concern the credit crunch squeeze is hitting smaller exchange players, quoting Philip Gotthelf, president of Equidex Brokerage Group that some brokerage houses
“are at 150 per cent of exchange margin. They’re essentially shutting the little guy out completely”. It is harder to buy or sell crude, because “there’s less credit around to do it.”
Gold prices posted their biggest one-day rise in absolute terms since 1980
As financial worries spread, Russia halted stock and bond trading in a response to the worst market falls since 1998.
The White House may decide as soon as this afternoon whether to ask members of the International Energy Agency to release emergency gasoline and diesel fuel inventories into the U.S. market, Energy Sec. Sam Bodman tells reporters
Chinese Premier Wen Jiabao called a meeting of the cabinet to back plans for a national inspection of milk products, the UK Press Association reports.
A news website devoted to American politics picks up the threads in the oil market speculation story. Politico outlines the scope of the lobbying by the airlines-to-truckers backed “Stop Oil Speculation Now Coalition” and its new sparring partner, the Wall Street-backed “Coalition to Protect Competitive Markets”.
Regulation is in the air. Politico notes that gas stations owners have put out signs calling for customers to urge Congress to “take action against speculators”
It’s like deja vu for the top mining executives who are presenting their corporate pictures this week at the Denver Gold Forum, an annual industry get-together. Just like last year, top mining executives are still grappling with the touchy issues of renewing reserves, controlling costs and struggling to put projects into production.
Here’s a look at some of the latest Reuters stories out of Denver from reporter Frank Tang:
A surprise cut in production from OPEC and Hurricane’s Ike’s looming presence in the U.S. Gulf of Mexico are supporting oil prices above $100 a barrel. Just a daily move? Not to some. On OPEC, UBS told clients: ”We think this is a serious deal for a real cut… In this market, direction matters and this is a turn.”
It’s hard to grasp just what’s behind the volatility in oil prices lately, says Jim Landers of the Dallas News, taking on the Bubble Theory for the $40 a barrel drop in oil prices since July 11. (Pictured above: Havana before Ike hit)
Gold’s oil-buying power is at its lowest in three years. (The chart shows the price of oil rising relative to the price of gold.) Hedge funds and other traders who play the gold/oil spread could be taking profits. Otherwise, this is hard to explain, since gold is considered a leading indicator of inflation.
In the past two weeks, crude oil prices rose to a record near $120 a barrel, while the spot price of gold fell from around $950 to $870 an ounce. Today an ounce of gold buys 7.65 barrels of oil. When gold was near $1,000 an ounce earlier this year, an ounce bought more than 10 barrels of oil. Gold’s weakest point relative to oil was in 2005 around 6 barrels.
Here are two outstanding examples of the ripple effects around the world when the dollar stumbles. Oil is at a record high at $110 and gold has topped $1,000 an ounce for the first time, while the dollar has fallen below 100 yen for the first time in more than a decade. Most commodities are priced in dollars, so the weaker the greenback, the cheaper it is for holders of other currencies to buy gold and oil. Gold is also generally seen as a hedge against oil-led inflation. Gold has jumped 19 percent this year on top of a 32 percent rise in 2007.