Asia Subdued as Crude Oil Flounders, Global Woes Support Dollar and Yen

Tokyo: Asian stocks were subdued early on Wednesday as floundering crude oil prices continued to dampen risk sentiment, while the dollar and yen drew support from anxiety over global growth and geopolitical risk stemming from Iran-Saudi tensions. 

MSCI's broadest index of Asia-Pacific shares outside Japan edged down 0.1 percent. Wall Street shares closed Tuesday on very modest gains and failed to provide Asia with much impetus. 

Australian shares lost 0.7 percent and South Korea's KOSPI dipped 0.1 percent. Japan's Nikkei bucked the trend and rose 0.2 percent. 

Risk markets are now waiting to see how Chinese equities will fare later in the session. Shanghai shares stabilised somewhat on Tuesday, following an arresting 7 percent plunge at the week's start that spooked stocks worldwide. 

Both the dollar and yen attracted bids amid the risk aversion that gripped financial markets globally from the start of 2016. 

The euro stood little changed at $1.0752 after shedding 0.8 percent overnight, when it a one-month low of $1.0711. 

The common currency was steady at 128.045 yen following an overnight drop of 1 percent. It dipped as far as 127.535 on Tuesday, its lowest since late April. 

Kathy Lien, managing director of FX strategy at BK Asset Management, wrote that the U.S. and Japanese currencies were being bought because "China is in trouble, U.S. data has been disappointing, Japan refuses to increase stimulus and oil prices continue to fall, but everyone's greatest fear is that stocks have finally peaked". 

The yen had a slight edge over the greenback. The dollar traded at 119.14 after slipping 0.3 percent overnight. It had hit a 2-1/2-month low of 118.705 earlier this week. 

In commodities, crude oil prices struggled near 11-year lows, with the market giving more attention to the stronger dollar and swelling U.S. inventories rather than growing tensions between Saudi Arabia and Iran. 

Relations between the two major oil producers collapsed in acrimony this week after Saudi Arabia's executed a Shi'ite cleric, setting off a storm of protests in Tehran. 

U.S. crude nudged up to $36.28 a barrel but was still down 2 percent on the week and near a seven-year low of $33.98 hit late last month. 

Oil-linked currencies like the Canadian dollar sank deeper on shaky crude prices. Canada's loonie fell to a 12-year low of C$1.402 to the dollar overnight.

OIL FUTURES: Crude Pushes Above $93/bbl

--U.S. crude oil adds gains as Middle East keeps traders on edge
--Nymex oil recently up 99 cents to $93.38/bbl
--Iran, Syria worries trump OPEC warning on demand slowdown

 
   By Jerry A. DiColo 
 

NEW YORK--U.S. crude-oil futures pushed higher Wednesday, adding to a $3 rally Tuesday as investors stay focused on renewed tensions in the Middle East.
Light, sweet crude oil for November delivery recently traded 99 cents, or 1.1%, higher at $93.38 a barrel on the New York Mercantile Exchange. Brent crude oil on the ICE futures exchange traded up 77 cents to $115.27 a barrel.
Oil prices rose Wednesday as concerns about Turkey and Syria continued to mount, after Turkey's top military commander warned that the country would take tougher action if Syrian shells continued to land on Turkish territory.
While Turkey and Syria aren't major oil producers, the possibility of expanded military activity highlights the threat that Syria's civil war could devolve into a regional conflict. Turkey is also an important oil-transportation route, and fears have grown that the 400,000 barrels a day of Iraqi oil piped to the Turkish port of Ceyhan could become a target.
"Elevated tensions and military activity along the Syria-Turkey border are reminders that isolated incidents could quickly spread," analysts at JP Morgan said in a note to clients.
On Tuesday, prices rose more than $3 a barrel as Israeli Prime Minister Benjamin Netanyahu called parliamentary elections for early 2013, a move seen by some as a way to shore up his political base ahead of possible military action against Iran.
The latest worries about oil supplies from the Middle East has trumped several reports this week suggesting global oil demand growth will stall.
The Organization of Petroleum Exporting Countries said Wednesday oil supplies will remain comfortable in the coming year, lowered its forecast for global demand growth this year and predicted a continued slowdown in 2013.
"Right now the market is undecided on the next move," said Phil Flynn, an energy analyst at Price Futures Group. "Weaker demand should mean lower prices but, in a world hellbent on keeping the economy afloat with stimulus, and the rising geopolitical risk, supply and demand won't matter."
Oil prices have seen big swings in recent days, but have still remained close to the level of $90 a barrel since falling from near $100 a barrel in mid-September.
In its monthly oil-market report, OPEC said oil-demand growth will fall to 800,000 barrels a day this year, down 100,000 barrels a day from its previous estimate. But the group warned that next year's demand faces "considerable uncertainties" that could lower its 2013 estimate by as much as 20%.
The OPEC report followed a report from the International Monetary Fund earlier this week suggesting that the risk of a global recession has risen, raising worries about oil demand even as Middle East tensions keep traders on edge.
Front-month November reformulated gasoline blendstock, or RBOB, recently traded 2.07 cents higher at $2.9794 a gallon. November heating oil recently traded 2.64 cent higher at $3.2296 a gallon.
--Ben Winkley contributed to this report.
Write to Jerry A. DiColo at jerry.dicolo@dowjones.com.

Oil prices rebound; Brent jumps above $113

WORLD oil futures have recovered on Middle East tensions according to analysts, helping to offset Saudi Arabia's pledge to satisfy global energy markets and "moderate" prices. 
 
Brent North Sea crude for delivery in November jumped $1.65 to $US113.46 ($A111.84) a barrel in late London deals.
New York's main contract, light sweet crude for November, gained $1.99 to $91.32 a barrel.
"Crude oil prices rebounded on Tuesday, as renewed concerns about Middle East tensions provided some upside momentum to the oil market," said Sucden Financial Research analyst Myrto Sokou.
NATO head Anders Fogh Rasmussen on Tuesday warned against the dangers of the conflict in Syria escalating, saying alliance member Turkey had shown commendable restraint in response to shelling of its border area.
Syrian shells last week killed five people in a Turkish border village, sparking a series of retaliatory strikes.

Oil prices meanwhile held onto their gains on Tuesday despite bearish comments by Saudi Oil Minister Ali al-Naimi.
"We will provide the markets with what they need," Naimi told reporters on the sidelines of a ministerial meeting in Riyadh. "We will work to moderate prices."
Addressing fellow ministers, Naimi warned that rising oil prices would affect economic growth across the globe, mainly in developing economies.
"Oil prices rose in March to levels not seen since 2008, which may adversely affect the global economy, particularly the economies of developing nations and emerging countries, as well as negatively impact global oil demand," he said.
Crude futures had fallen on Monday as the International Monetary Fund and World Bank slashed their 2012 growth forecasts.
The IMF cut its forecast for Chinese economic growth this year to 7.8 per cent, while the World Bank said it expected the world's second-largest economy to grow at a slower-than-expected 7.7 per cent.
The brokerage Phillip Futures said in a note to clients that "China's economic growth and demand for petroleum have been key supports for oil prices since global energy demand was hit by recession after the financial crisis."

Oil prices rebound; Brent jumps above $113

WORLD oil futures have recovered on Middle East tensions according to analysts, helping to offset Saudi Arabia's pledge to satisfy global energy markets and "moderate" prices. 
 
Brent North Sea crude for delivery in November jumped $1.65 to $US113.46 ($A111.84) a barrel in late London deals.
New York's main contract, light sweet crude for November, gained $1.99 to $91.32 a barrel.
"Crude oil prices rebounded on Tuesday, as renewed concerns about Middle East tensions provided some upside momentum to the oil market," said Sucden Financial Research analyst Myrto Sokou.
NATO head Anders Fogh Rasmussen on Tuesday warned against the dangers of the conflict in Syria escalating, saying alliance member Turkey had shown commendable restraint in response to shelling of its border area.
Syrian shells last week killed five people in a Turkish border village, sparking a series of retaliatory strikes.

Oil prices meanwhile held onto their gains on Tuesday despite bearish comments by Saudi Oil Minister Ali al-Naimi.
"We will provide the markets with what they need," Naimi told reporters on the sidelines of a ministerial meeting in Riyadh. "We will work to moderate prices."
Addressing fellow ministers, Naimi warned that rising oil prices would affect economic growth across the globe, mainly in developing economies.
"Oil prices rose in March to levels not seen since 2008, which may adversely affect the global economy, particularly the economies of developing nations and emerging countries, as well as negatively impact global oil demand," he said.
Crude futures had fallen on Monday as the International Monetary Fund and World Bank slashed their 2012 growth forecasts.
The IMF cut its forecast for Chinese economic growth this year to 7.8 per cent, while the World Bank said it expected the world's second-largest economy to grow at a slower-than-expected 7.7 per cent.
The brokerage Phillip Futures said in a note to clients that "China's economic growth and demand for petroleum have been key supports for oil prices since global energy demand was hit by recession after the financial crisis."

The good news behind high crude oil prices

WASHINGTON ( commodity news world ) : Rising oil prices often are the death knell for economic recovery. This time around the surge in crude oil is looking more like a harbinger of better days.

Political tensions over Iran's nuclear ambitions have pushed crude oil prices up 11 percent over the past month to around $123 a barrel, stoking concerns a violent confrontation that reduced supplies could send Brent crude above $150 a barrel.

Oil at that level could undermine a gradual strengthening of the world economy. Even at current levels, it could shave 0.2 percentage point from growth, analysts said.

Just as Europe's sovereign debt problems have started to ease, oil has emerged as a new headwind.

But the Iran-driven spike masks a broader underlying trend, and as long as military strikes are avoided, it appears to pose only a limited risk. In other words, there is a good news story.

Crude oil prices have been climbing in fits and starts since early October in line with slowly improving economic data, especially in the United States.

Equity prices have risen in lockstep with oil's advance. When the two rise together, it usually indicates a broad-based economic expansion. The Standard and Poor's 500 index is up 17 percent since the beginning of October, and MSCI's global equity index has recouped all its losses since the U.S. debt debacle last summer.

This suggests that roughly half of the 25 percent gain in the price of Brent crude since early October reflects a strengthening of global demand, economists said. The world's factories are churning out goods at a faster pace, a key indication of the economy's strength, meaning it is in better shape to handle a supply shock from Iran than a year ago.

"We think that crude oil prices have risen more because of improving sentiment regarding global growth than because of geopolitical risk concerns," Deutsche Bank told clients.

WAGES CUSHION THE BLOW

A sterner test will be whether consumers can absorb the higher costs at the gasoline pump, since their spending accounts for about two-thirds of all economic activity in developed economies. And that will depend upon wage gains.

So far, the news here is reasonably encouraging too. American wages and salaries have risen at a 5.7 percent annual rate in the seven months through January. Average hourly earnings, to be reported on Friday as part of the government's monthly jobs report, are expected to have advanced by 0.2 percent in February from the prior month.

U.S. gasoline costs have accelerated at an even faster pace. They are up by 10 percent from their lows late last year and in California have topped the psychologically important $4 a gallon level. But so far the hit to the American wallet has been less severe than during the Arab spring a year ago.

A warm winter and a 30 percent plunge over the past three months in prices for natural gas, the fuel used to heat most American homes, have cut the average household energy bill. And more people have jobs today, providing more of a cushion to absorb costlier gasoline.

"So far there is no sign that these higher prices are getting in the way of an improving trend in U.S. consumer confidence currently supported by a better labor market," said Jacques Cailloux, chief European economist at Royal Bank of Scotland.

The U.S. jobs report for February due out on Friday is expected to show 210,000 new jobs were added outside the farm sector, the third month in a row of gains above 200,000. Tom Porcelli, chief U.S. economist at Royal Bank of Canada, said he will watch closely for signs of growth in higher-paying sectors, which would provide further support to consumer spending.

Otherwise, rising gasoline costs could start to bite. Porcelli said three to six months above $4 a gallon could shave half a percentage point off U.S. GDP, which economists currently see expanding around a 2.2 percent rate in 2012.

INFLATION RISKS

The dent could be even larger in Europe, where wages are lagging. Adjusted for inflation, the Organization for Economic Cooperation and Development estimates that wages in the euro zone this year will expand on average by 0.4 percent, and even less for Germany, Europe's biggest economy.

Deutsche Bank reckons that if oil were to rise by 50 percent from its baseline, twice the advance so far, it would rob 0.4 percentage point from euro zone GDP in the first year. The region already is expected to contract slightly in 2012.

In Asia, the picture is more mixed and inflation the primary concern.

Many Asian economies have fuel subsidies, which would cushion the blow to households. But if governments start to pass on the energy costs, as Deutsche expects in India and Indonesia, inflation could rise sharply.

Inflationary pressures would complicate the role of central banks, possibly quashing prospects for further monetary support for the recovery.

But for now, rising oil prices largely are a growth story.

TSX slides as oil, gold prices fall

Canada's benchmark stock index was on track Friday for its second weekly decline of the year as oil and gold prices fell.
As the close approached, the S&P/TSX composite index had slid 79.64 points, or 0.63 per cent, to 12,643.82.
The price of crude oil dropped $2.14 to $106.70 US a barrel on Friday, while gold fell $12.40 to $1,709.80 US an ounce.
The Canadian dollar dipped 25 basis points to $1.0118 US in late-afternoon trading.
Concern that stock markets in the U.S. may have rallied a bit too much led to something of a pullback there on Friday.
``There's a whole too far, too fast thing,'' Rick Fier, vice president of equity trading at Conifer Securities LLC in New York, told Bloomberg. ``We don't think that means it's going to have a huge pullback, but a consolidation would be a relief.''
The Dow Jones industrial average, which had swung between gains and losses Friday afternoon, was down 3.18 points, or 0.02 per cent, to 12,977.12 at the closing bell, while the Nasdaq composite index had slipped 12.78 points, or 0.43 per cent, to 2,976.19.
Asian markets advanced on Friday - the Nikkei in Tokyo rose 0.72 per cent and the Hang Seng in Hong Kong gained 0.81 per cent. European markets were mixed: London's FTSE slipped 0.34 per cent, the CAC in Paris was just above flat with a gain of 0.04 per cent and the DAX in Frankfurt fell 0.29 per cent.
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India's energy demand may slow down to 4.5% by 2030

NEW DELHI (Commodity news world ): India's energy demand may slow down to 4.5% per annum by 2030 on improvements in energy efficiency, according to global energy giant BP plc.

According to the report, India's energy imports will jump drastically by 2030 to meet the domestic needs. The country's gas imports will jump 47%, crude oil by 91% and coal will jump 40%.

India's share of industry will continues to grow, as infrastructure development and manufacturing gains and manufacturing expands to absorb a growing labour force.

Meanwhile, according to the report, China and India will be the world’s largest and third largest economies, jointly accounting for about 35% of global population, GDP and energy demand.

India is expected to consume half the total energy consumed by China in 2030.

By 2020, coal will remain the commercial source of energy.

In 1999-2010, India’s annual energy demand growth accounted for 5.5% per annum.

Gold Looks to US Inflation Bets, Dollar Price Action for Direction

Talking Points

• Crude Oil May Pull Back but Bias Favors the Upside on Iran Tensions
• Gold Looks to US Inflation Outlook, Dollar Price Action for Direction
• Copper at Risk on Risk Aversion But Reports of Shortage May Support

Tensions with Iran continue to inject a considerable geopolitical risk premium into crude oil prices, with the WTI contract touching an 8-month high yesterday. The latest bit of escalation came after talks between Tehran and IAEA came apart after the government refused to allow inspection of a site in Pachin reported to be testing explosives.

Technical positioning warns a pullback may be ahead however (see below), hinting the recent batch of supportive news-flow has been priced in already. Still, with Iran reportedly starting to conduct civilian defense drills in preparation for armed conflict, the satiation is unlikely to be defused quickly (if at all) so the path of least resistance continues to broadly favor the upside.

Gold prices jumped to the highest in 3 month yesterday on the back of a widely-circulated Financial Times article that claimed the Federal Reserve will extend the so-called “Operation Twist” stimulus program beyond June. The scheme has the Fed selling shorter-term assets on its balance sheet in exchange for further-dated ones to target a decline in the long-term borrowing costs. Bloomberg News also cited sources saying buying by automated trading systems buoyed prices.

Looking ahead, strong correlations between precious metal prices US inflation expectations (measured by “breakeven rates”, the spread between nominal and inflation-linked Treasury bond yields) puts the spotlight on US jobless claims and House Price Index figures due today. An overnight pullback in the US Dollar may also emerge as a supportive factor, although a sudden downward reversal in S&P 500 stock index futures in early European trade may reboot safe-haven demand for the greenback to the detriment of both gold and silver. The selloff appears to have followed an EU Commission report forecasting the regional bloc’s collective economy will shrink 0.3 percent in 2012 (compared with previous estimates of a 0.5 percent expansion).

The emerging adverse reversal in risk appetite trends likewise bodes ill for Copper prices. The metal remains highly sensitive to global economic growth expectations, meaning the return of slowdown fears is likely to be a considerable headwind. Selling pressure may be at least partially offset near-term however amid reports that production lagged demand by the largest margin (119,000 metric tons) in November, according to ICSG.

WTI Crude Oil (NY Close): $106.28 // +0.44 // +0.42%

A candle in Star position below resistance at 106.81, the 138.2% Fibonacci extension,gives earlywarning thata pullback may be ahead. Initial support lines up at 105.61, the 123.6% Fib. A break lower exposes the January 4 swing high at 103.66.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1776.22 // +17.10 // +0.97%

Prices continued higher after putting in a Bullish Engulfing candlestick pattern above support 1714.60, breaking resistance at 1763.00. The bulls now aim to challenge the November 8 high at 1802.80, although early signs of negative RSI divergence hint upward momentum may not prove long-lasting. The 1763.00 level has been recast as near-term support.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $34.27 // -0.04 // -0.12%

Prices are testing above range resistance at 34.37, the February 2 swing high, with an upward breakout exposing the 35.30-66 area. For now, support remains at 32.60, the 23.6% Fibonacci retracement level, though a confirmed upward piercing of 34.37 on a daily closing basis would recast that level as the immediate downside barrier.

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.834 // -0.002 // -0.05%

Prices have paused after taking out resistance at 3.789 (now acting as near-term support). Renewed upward momentum initially targets 3.909. Alternatively, a break back below 3.789 sees rising trend line support at 3.720.

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

Commodity Outlook for early 2012: Base metals sluggish, Silver, Oil moderately bullish

Volatility will continue in commodities and equities but commodities will continue to outperform other asset classes.  The markets will be impacted by the Eurozone crisis, US financial crisis, already the United Nations has signaled a global recessionary threat in 2012-13.

Recently, central banks in China and some European countries have lowered their interest rates, focusing on growth, which augurs well for commodities.

Commodities witnessed  $10 bn outflow of fund money in September but rebounded with $2.1 bn inflows in October. The outlook is still mixed for most commodities although precious metals may perform better in 2012.  Commodities witnessed in January to April – net inflows of $24 bn (Compared to January –April 2010 inflows of $16 bn)
May to October 2011- Net outflow of $8.5 bn. May saw acute market volatility due to strengthening of Eurozone debt worries, US financial crisis.

Rupee depreciated 17.4% in 2011 against US Dollar , Euro, GBP fell by 5.3%-- to impact India’s imports, inflation and commodity markets. Domestic inflation may sustain on higher imported cost of oil, coal, metals, minerals. Export oriented IT, textiles to benefit.

Indian commodities
Falling financial institutional infows (FII) inflows suggest weak outlook on Indian economy, Foreign Direct Investment (FDI) inflows less volatile to Eurozone worries.

Key points: Rs 115 lakh crore turnover in commodity futures trading in 2010-11 representing 50 % growth  The cumulative value of trade from 1st April, 2011 upto 31 st  October, 2011 for the financial year 2011-12 was ` 106, 36,960.76 crore.  Commodity trading volumes in India have risen close to 70% in April to November 15, 2011 at  Rs 113 lakh crore compared to Rs 67.11 lakh cr in corresponding period last year.

It is observed that at least 20 per cent of capital market traders have added commodity to their trading pattern and out of them at least 7 per cent have shifted completely to commodities from equities. (based on three years of data collection by Commodity Online)

Gold Outlook: To touch 28700 by the end of  2011, 32500 by 2012
Gold will trade positive in 2012 driven by central bank buying, India China consumption, global macro-uncertainties and higher investment demand especially through exchange traded funds (ETFs).

Gold prices surged 28% to $1923.70 in September in 11th year of bull run and with US interest rates close to zero and continuing Eurozone debt crisis  that adds to the safe haven appeal of gold.  Gold has surged 38 percent this year, touching a record 29300 rupees per 10 grams in Indian market.  Weak rupee may provide further support for prices. Commodity Online Research expects gold to touch Rs 28700 per 10 gms by end of this month and Rs 32,500 by 2012.

Gold  held in ETFs globally has climbed to a record 2,358.206 metric tons on December 6.

Global gold demand in third quarter of 2011 was strong at 1,053.9 tonnes, an increase of 6% compared to the same period last year. This equates to US$57.7bn, an all-time high in value terms. This increase was driven by investment demand which rose by 33% year-on-year to 468.1 tonnes, generating record quarterly demand of US$25.6 bn. Healthy growth in jewellery demand and modest gains in demand from the technology sector were offset by a year-on-year decline in investment, principally from ETFs and similar products.

In India, latest industry report indicates that the average assets under management for Gold ETFs is more than Rs. 9000 Crores which indicates that Gold is emerging from the shadows of equity and debt with an identity of its own as a preferred investment opportunity.

Gold has risen 20 percent annually in the past four years. In 2011, Gold has given highest return of more than 35 percent in last 10 years. This year closing prices are expected in range of 28700-900 rupees. In 2012, first quarter, gold to touch Rs 31,600 per 10 gms.

Downside momentum is expected till 28200.  Support – 26500, 27300, 28500 .Resistance – 30200, 31500, 32600.Recommendations : Buy Gold in range of 28500-28600 SL 27200. Target 31300, 32700

Silver to be moderately bullish
Silver prices may witness moderately bullish trends in 2012 on global macro-economic uncertainties and possible fall in industrial demand for the commodity. Investment demand may gain especially in India where the demand usually comes from farmers and rural households who store their savings in Silver bangles and coins. Depreciating rupee may weaken demand for precious metals as import costs rise. Higher prices may act as deterrent for buying in India.

In 2010, silver futures have outperformed all base metals and bullion commodities giving a return of 73%.  Current market prices are trading in range of 55000-57000 rupees per kilogram in India.

Silver is also having direct relationship with Euro and inverse relationship with US dollar, as the movement of EURO is generally moving in negative direction with US dollar and most of the other currencies, we may face zig zag movement in the prices of silver.

MCX Silver will trade positive at 58526 levels in the coming weeks could rise to Rs 64000 per kg by February if it breaks Rs 60,000 levels or else it could fall to Rs 46000.

Silver futures climb to more than 56 percent to 73600 rupees per kilogram. After touching all time high levels, Silver dips to 46000 rupees as Euro zone debt crisis fear market condition. Silver move downside along with base metal complex.

Overall view for Silver is moderately bullish for coming year. Short term bearishness can be considered as buying opportunity to buy this white metal at dip. As the world economy worsens, its affects Industry demand for Silver. In case, down-trend continus,  then Silver may touch bottom levels of 48000 and 42000 rupees in coming months. Supportive micro economical data will help Silver to move higher till 62000. Looking at the current market, we don’t expected much space in upper range for now.

Support : 48500, 52000, 55000
Resistance : 58000, 60000, 62500
Recommendations : Buy Silver in range of 51000-52000 SL 47000 Target 58000, 61500

Crude Oil
Crude oil prices may continue to remain bullish at the start of 2012 on geo-political tensions and possible production cuts by OPEC to be announced on December 14, 2011.  Libyan production has resumed and is expected to come back to 1.6 mn barrels per day by end of 2012, but is still lags behind pre-civil war levels.  Global oil demand is expected to decline on Eurozone debt crisis, US financial crisis and weakening of growth in emerging economies.

Hence, Crude Oil prices will trade in positive territory. MCX Crude Oil futures outlook is positive and may climb to Rs 5360 to Rs 5500 per barrel.

Base Metals to remain sluggish in 2012
Base metals will remain sluggish on slower rate of growth reported in China and Japan, the leading consumers of metals.  In India, higher inflation rates, lower IIP data and lower GDP growth is dampening the base metals market.

The ongoing Eurozone sovereign debt crisis and tighter Chinese monetary policy appear to have also had an impact on demand and confidence.

LME Copper is down 18 percent this year, and is headed for its first annual decline since 2008 when a financial crisis tripped the global economy, with demand from top copper consumer China also far from aggressive. Aluminium capacity is being idled on lack of demand and higher energy curbs in China.  Nickel   has fallen significantly in 2011 among the all base metals from its high due to increasing concerns of global economy,low demand and increasing LME stocks.

Nickel will remain bullish for coming sessions and its expected to touch the level of Rs. 1006 which is expected to touch within couple of months.

Lead market is balanced in demand and supply scenario but goiing ahead into 2012 it we believe that supply side would be steadily increasing yet structural change announced by Chinese government should be watched properly as mojor Lead producers are being stopped.

Agriculture
In the agri front, some commodities have shown immense potential in its movement in Futures market while it has also given marginal profit to producers and farmers as well. Take for instance Guar Seed, the prices of which may extend the gains in near term on expectation of lower output in 2011-12 and lower carryover stocks along with robust export demand.

At the same time a commodity like Cardamom has prices have falling by Rs.670 per k.g – from 1580 to 609 -almost 170% down from last year closing. Higher production, and some carryover stocks are some of the reasons for downside in Cardamom.

Rubber prices have shown a firm trend in recent times and rising Crude Oil prices and adverse weather in Thailand had given support for prices. The Indian tyre industry demand for further import at concessional or zero duty has been ruled out by Finance Ministry which allowed 40,000 tonnes at concessional rate of 7.5%. China buying in January may push prices. Indian prices are consolidating at 20,000 levels and is looking for fresh triggers for upside gains.  With a deficit of 75,000 metric tonnes forecast and growth in production of 2.5%, consumption by 2.5%, Rubber prices seem well supported at current levels.

In Pepper, domestic demand is moderate to strong and arrivals are weak these days. In long term, technically the break out of 37300 will take price higher to 39600 if volume supports. While in short-term the prices of future are expected to trade positive. Futures traders can enter into buying positions.

Strategic decisions in moving commodities can bring gains to Futures traders while in the case of physical traders, lack of storage facilities have put them in a dock to store agri commodities. Most traders in north are buying agri commodities and is taking advantage of the mushrooming cold storage facilities from Jaipur to Delhi corridor to store them for two to three years.

According to Futures Industry Association (FIA), number of contracts traded globally in futures and options is higher in agri-commodities compared to metals, energy and other categories.

curtsey  www.commodityonline.com 

Crude Oil Rises on Increasing U.S. Consumer Sentiment, European Accord

Oil climbed the most in more than a week after a report showed that confidence among U.S. consumers rose to a six-month high and as European leaders agreed to boost the region’s rescue fund and tighten budget rules.

Futures gained 1.1 percent after Thomson Reuters/University of Michigan preliminary index of consumer sentiment increased to 67.7 in December from 64.1 at the end of last month. European countries announced steps to ease the area’s debt crisis without forging an accord among all European Union members.

“The consumer confidence number is another positive signal about the U.S. economy,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We seesawed earlier today as people tried to get a handle on the results of the European summit. The agreement is starting to give the market some reassurance.”

Crude oil for January delivery advanced $1.07 to settle at $99.41 a barrel on the New York Mercantile Exchange. It was the biggest gain since Nov. 29. Futures have increased 8.8 percent this year. Prices decreased 1.5 percent this week because of rising U.S. stockpiles and concerns about the debt crisis.

Brent oil for January settlement increased 51 cents, or 0.5 percent, to end the session at $108.62 a barrel on the London- based ICE Futures Europe exchange.

The U.S. consumer confidence reading was projected to rise to 65.8, according to the median estimate of 73 economists surveyed by Bloomberg News.

The U.S. was the world’s biggest oil-consuming country in 2010, responsible for 22 percent of global oil demand, according to BP Plc’s Statistical Review of World Energy released on June 8. The 17 countries using the euro accounted for about 12 percent of world demand last year, BP figures show.
Debt Rules



The European countries enshrined debt rules in a new treaty that leaves out the U.K. instead of amending EU agreements that date back to the 1950s.

European Central Bank President Mario Draghi hailed a “very good outcome” a day after he damped expectations that a deal would prompt the ECB to step up its bond-buying.

The agreement added 200 billion euros ($267 billion) to the region’s war chest and tightened rules to curb future debts. The leaders sped the start of a 500 billion-euro rescue fund to next year and diluted a demand that bondholders shoulder losses in rescues.
Market Driver

The Standard & Poor’s 500 Index (SPX) gained 1.7 percent, and the Dow Jones Industrial Average advanced 1.5 percent at 3:06 p.m. in New York on the rescue fund and the U.S. confidence figure.

“The oil market is being driven for the most part by what’s happening in equities,” said Kyle Cooper, director of research for IAF Advisors in Houston. “We could open a dollar higher or lower Monday based on the weekend headlines from Europe.”

Oil may fall next week on concern that the summit won’t ease concerns about the spread of the debt crisis, a Bloomberg News survey showed. Eleven of 27 analysts and traders, or 41 percent, forecast oil will decrease through Dec. 16. Nine respondents, or 33 percent, predicted futures will increase and seven estimated there will be little change.

EU governments are also considering imposing stiffer sanctions on Iran, OPEC’s second-largest oil producer after Saudi Arabia, amid “serious and deepening concerns” over the country’s nuclear program, according to a draft EU summit statement. Foreign ministers will decide on the next set of sanctions Jan. 30, the statement showed.

Japan issued new sanctions against Iran over the country’s suspected nuclear weapons program, the Trade Ministry said in a statement today in Tokyo.
Iranian Output

Iran pumped about 5 percent of the world’s crude last year, based on BP’s data. The country is on the Strait of Hormuz, through which about a fifth of global oil supply is transported, according to the U.S. Energy Department.


The Organization of Petroleum Exporting Countries may set a new collective production quota at its meeting in Vienna on Dec. 14 without setting individual country allocations, according to consultant PFC Energy. The group has not changed output targets since 2008.

Nymex will cut the margin requirement on crude and heating oil futures from the close of business Dec. 12, CME Group Inc., the exchange’s parent company, said yesterday. The margin for light sweet crude will be $7,560 per contract, 6.7 percent lower than the current level. The exchange last reduced the margin to $8,100 from $8,437.50 in May.

Oil volume in electronic trading on the Nymex was 555,760 contracts as of 3:06 p.m. in New York. Volume totaled 647,193 contracts yesterday, 1.8 percent below the three-month average. Open interest was 1.33 million contracts.


To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

Oil rises above $109, Iran in focus

(Reuters) - Oil rose above $109 a barrel on Friday as rising tension over major oil exporter Iran and a report showing the U.S. economy created more jobs countered concern about the euro zone debt crisis.

The EU and U.S. tightened their sanctions against Iran on Thursday in response to mounting concern over Tehran's nuclear work, increasing concern over a possible disruption to oil flows from the second-largest OPEC producer.

"The Iranian situation is one of those things that could have a really bullish potential impact," said Tony Machacek, energy broker at Jefferies Bache in London.

"At the moment, it's a supportive factor and one of the issues that makes you think the market won't come off too far from here even if there is more economic doom and gloom all of a sudden."

Brent crude rose 45 cents to $109.44 a barrel by 1349 GMT, down from an intra-day peak of $110.41. U.S. crude climbed 40 cents to $100.60.

For the week, Brent is heading for a more than 2 percent gain. U.S. crude is poised for a rise of over 3 percent, its first weekly gain in three.

In a further sign the U.S. economic recovery was gaining momentum, employment growth picked up speed in November and the jobless rate dropped to a 2-1/2 year low of 8.6 percent.

Nonfarm payrolls increased 120,000 last month, the Labor Department said on Friday, in line with economists' expectations for a gain of 122,000.

On Thursday, the Institute for Supply Management said U.S. manufacturing activity rose to its highest in five months, following earlier data on consumer spending and private-sector job creation that were also positive.

"Data out of the U.S. has been strong and that has helped support oil prices. The market wants to move higher, but is reluctant to, unless it sees a clear resolution to the euro zone crisis," said Victor Say, analyst at Informa Global Markets in Singapore.

In Europe, whose sovereign debt problems have weighed on oil prices for months, the European Central Bank signalled on Thursday it stood ready to act more aggressively to fight the region's crisis if political leaders agree next week on much tighter budget controls.

With sanctions against Iran being tightened, the prospect of disruption to its oil supplies remained in focus, possibly as a pre-emptive move by Iran.

"The political process (to impose sanctions) will take time, but if Iran sees a loss of income as inevitable, there is a greater risk that it takes what limited political and economic capital it has to the negotiating table by invoking a pre-emptive export ban," analysts at JP Morgan said in a report.

While such a move was likely to trigger the release of strategic reserves, the initial market shock could boost prices by $20 to $30 a barrel, the report said.

Royal Dutch Shell said on Friday it would cease operations in Syria, a much smaller oil producer than Iran, to heed new European Union sanctions against Damascus.

(Additional reporting by Francis Kan in Singapore; Editing by William Hardy)

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