Commodity Corner

Views on commodities and energy

NYMEX First to Second Month Crude Spread

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The spread between the front month and second month oil futures continues to narrow.

The deep spread seen in earlier this year, caused primarily by slumping fuel demand due to the economic crisis, was heightened by the monthly of passive investment funds, especially the giant United States Oil Fund. On Feb. 6, when the fund last rolled its positions from the first to second month futures conracts, it held movre than 20 percent of the front month.

Analysts said that the move by the exchange traded fund to roll its front month positions to the second month over a four day period — rather than on just one day — may lesson the volatility of the shift.

Open Interest in U.S. Crude Oil Futures

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Open interest and trading volumes in commodity futures markets have shown some resilience at the start of 2009 despite the dramatic price slides triggered by the economic downturn.

In the fourth quarter of 2008, open interest in U.S. crude oil futures fell to levels not seen since mid-2006 as the global economic crisis hit fuel demand and sent prices tumbling, before rebounding.

U.S. Crude Futures Contracts Held By United States Oil Fund in 2008

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The United States Oil Fund LP exchange traded fund has built up a large position in crude oil over the past four months, accounting for nearly a quarter of the open interest in the March contract on the NYMEX last week.

Following is a list of the tentative 2009 oil futures contract roll dates for the fund, according to United States Oil Fund’s Website.

Drop in oil demand slowing?

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The drop in U.S. oil demand against year-ago levels has begun to slow as data is compared with weak levels from 2008, when consumption slowed due to the slumping economy and the high fuel prices seen during the first half of the year.

The graph shows the change in U.S. demand over the four-week period from levels from the previous year.

Energy agenda: Offshore recovery efforts

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1Lt. John Savell (L) and Lt. Collin Smth of the Louisiana National Guard walk near a puddle during a foot patrol in the Lower Ninth Ward following Hurricane Gustav in New Orleans, Louisiana September 3, 2008. REUTERS/Lee Celano (UNITED STATES)Oil prices are slipping this morning, reacting more to dimming prospects for U.S. growth after a report showed job losses in August than the tropical storms building in the Caribbean.

October crude was last down close to $2 at $105.92 a barrel on the NY Merc — just about the level Iran’s OPEC governor said on Friday is “appropriate.”

Pickens misses the turn

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T. Boone Pickens is pretty calm for a guy who lost more than a billion dollars.

The Texas energy tycoon has put his considerable wealth behind a renewable energy effort, saying he’s sick and tired of seeing America send all of its money overseas to pay for imported oil. But he’s also suffered a considerable loss on his energy investments: He “missed the turn.”

Read about it here and watch edited video below.

Commodities Roundup: Solar rally, ‘dismal’ picture of fuel demand

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chavez1.jpgU.S. crude futures are holding near $108 a barrel, as U.S. data shows that refinery utilization dropped to the lowest on record last week in the wake of Hurricane Ike.  Crude stocks dipped by less than expected thanks to the lower demand from refineries.

“The EIA data shows you that demand looks abysmal. The crude import numbers are surprising. Going forward, I see inventories rising,” said Kyle Cooper, director of research at IAF Advisors.

Commodities Roundup: Credit squeeze felt

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Look at meGold 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.

Commodities Agenda: Offshore damage and what’s next for diversification?

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On the serefiner.jpgcond 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.

Commodities Agenda: Impact of Gustav and Ike (and a cameo from Lehman)

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houston.jpgU.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.