Commodity Corner
Views on commodities and energy
Commodities Agenda: Offshore damage and what’s next for diversification?
On the second day of financial services turmoil, CNBC keeps a live update of the crude oil price on lower-right of the screen. An interesting choice for a sentiment indicator, particularly with the benchmark stock indices little changed.
Lehman Brothers, Merrill Lynch and American International Group all are clearing members on major commodity exchanges. All three had been active in getting clients to invest in the rally that made commodities the best performing asset class of the past few years, Barani Krishnan writes in an analysis on the apparent breakdown in relationships in asset classes.
(U.S. crude traded down $3.96 to $91.75 a barrel by 9:55 a.m. EDT in what’s seen as a move to cash. The Reuters-Jefferies CRB Index, a global commodities benchmark, neared eight-month lows on Monday.)
Some other stories we’re watching in commodities today:
- Hurricane Ike did not appear to inflict heavy damage on oil refineries, FEMA told reporters. Nonetheless, several offshore platforms in the Gulf of Mexico — including BP’s big Mad Dog facility — were damaged. It’s a sign a full recovery of oil and natural gas production in the region could be a long way off.
- Farm Foundation Forum on rural health insurance issues.
- Expecting Mexico and Central American coffee exports data and Nicaragua coffee figures
- Venezuelan Oil Minister Ramirez and Chile’s Mining Minister on a visit to sign exploration contracts
And the question for the day… What now for the pension funds and commodities diversification theory?
Commodities Agenda: Impact of Gustav and Ike (and a cameo from Lehman)
U.S. crude futures have just settled down 5.4 percent at $95.71 a barrel. Turmoil in the stock market plays a role but early signs Hurricane Ike spared key energy infrastructure also weighed on prices. In Texas, Chris Baltimore writes “widespread power outages were the key hindrance. Electricity is the lifeblood to Gulf coast refineries.”
Early indications are that the storm caused only minor to moderate damage to platforms and coastal refineries.
CUMULATIVE IMPACT OF GUSTAV AND IKE *20.48 million barrels of crude oil *102.79 billion cubic feet of natural gas *33.06 million barrels of refining (counting only plants completely shut)
CURRENTLY SHUT/SLOWED *99.9 pct Gulf of Mexico oil output *93.8 pct Gulf of Mexico gas output *16 refineries shut, 24.6 pct of US capacity *5 refineries representing 7.7 pct of US capacity at reduced rates *Some ports, Gulf Coast pipelines ramping back up *At least 55 ships await entry to Houston stock market plays a role but early signs Hurricane Ike spared key energy infrastructure also weighed on prices.
We have had bad weather for years, and just this last year the cumulative effects, not the present storms, have driven prices (duh?). Speculators are similar to fundamentalist preachers. They make a living off of unfounded fear and what could happen.The American press is dumb enough to buy into the story line even if the world economy is ruined.
Goldman Sachs and AP employees with shopping carts in a very cold Central Park is a wonderful thought.
Commodities Agenda: Ike idles U.S. Gulf energy industry
Oil prices are rising as Hurricane Ike moves within 24 hours of striking the coast near Houston with a possible 20-foot (6-meter) wall of water. A slew of oil refineries located in Galveston Bay that account for around 12 percent of U.S. capacity were also in the storm’s likely path. Weather forecasters at Planalytics saw “major and long-term damage likely at the major refining cities.”
Ike, the federal response and updates of output will set the tone for the day. Here’s a look at output shut in the Gulf and list of oil companies shut and some other events in commodities:
- Senate Energy Committee hold day-long summit to discuss America’s energy problems and solutions.
- Could see big calls for corn/soy after weaker than expected crop and stocks numbers.
- Ed Stoddard and Yereth Rosen probe whether Sarah Palin a friend or foe of big oil. As governor of Alaska, she raised taxes on oil companies. But on drilling, her positions look very like Vice President Dick Cheney.
Commodities Agenda: OPEC, Ike and oil
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 $40 a barrel drop in oil prices since July 11. (Pictured above: Havana before Ike hit)
Here are some of the stories Reuters commodities reporters are keeping an eye on today:
- MMS releases updated production data from Gulf of Mexico in Gustav’s wake
- Independent report on role of speculators in big oil, commodities price swings
- Denver Gold Conference winds down but not before we’ve heard from miners Freeport, Newmont and Barrick
Its not hard to grasp what was behind the upward volitily of oil over the past few months at all. Why do I continually hear this comment? The use of forward contracts by easily found oil companies and the Dubai exchange over the past several months should result in criminal charges. These greedy people almost drove the world economy into a recession.
They certainly negatively impacted the US economy and the auto industry in a very negative way too and it was all for short term profit with n oconcern for anything else.
Commodities Agenda: Offshore damage and what’s next for diversification?
As mentioned in your article-only minor nos of drilling platform are damadged-seeing the crude price movement now crude can go max upto 98/101 and go down till 85/80$, and may try to go further low below US$50/ in comming months while Silver prices are low which may go uptill 14$ come down to 12$ n go till 16-20$ later stage, gold can be up too, but copper can fall till 5800/6100$ first.
you may publish this article with name
R J Manek 9/16/08