The National Multi-Commodity Exchange has launched gold guinea contract that enables retail players to take part in the futures contracts. The contracts will be for a minimum of 8 gm. NMCE has signed an agreement with the Muthoot Group o facilitate the futures trade in the guinea contract system.
The much awaited minimum support price for wheat turned out to be a dampener as markets were expecting Rs 1180 to Rs 1200 per quintal for the current year’s crop which has halted the rally in wheat futres.The Rs 1,100 rate, approved by the Cabinet Committee on Economic Affairs (CCEA), represents a Rs 20 rise over the MSP of Rs 1,180 a quintal for the 2008-09 crop.
Meanwhile, annual food price inflation inched up to 13.39% in the week ended October 24 from 12.8% in the week before. Weakest monsoon rains in last seven years and floods in parts of the country have hurt farm output and pushed up the food prices. : India’s economic growth in the ongoing fiscal could fall to 5.5% in the ‘worst-case scenario’ of a sharp decline in agriculture sector performance, the Planning Commission has projected. This is much lower than the 6.3% growth in the national income estimated by the Plan panel on the worst case assumption that agriculture growth will fall by 2.5%.
Gold
The Dollar Index had weakened sharply and at the same time gold prices have gained phenomenally. Prices of gold are expected to rise further and this has initiated the move by the RBI to diversify the foreign-exchange holdings. A weaker dollar could diminish the value of India’s foreign exchange reserves and hence this could lead to further accumulation of gold by the RBI. This move will help India’s central bank to hedge its downside risk on the foreign exchange reserves front. India’s gold holdings have dropped from over 20% in 1994 to just 4%. We feel that the RBI could move forward to accumulating more reserves as gold is expected to shine for the years to come. Also, gold is traditionally considered as a safe-haven investment.
This development could be positive for the gold market and the yellow metal could test new highs in the coming months. What can further add to the upside in Gold prices is the move by Russian and Chinese central banks to purchase the yellow metal. Technically after Gold prices crossed the high of $1,033/oz which was first made in March 2008, prices have continued trading higher. The metal is in a secular bull trend and the dollar index is in a secular bear trend. This further indicates that a weaker dollar could continue to support an upside in gold prices as it makes the metal look attractive for holders of other currencies. Investment demand for Gold is also expected to rise on the back of higher ETF and HNI demand. This rise in investment demand will help to compensate for the decline in consumer demand for jewelry and fabrication on the back of high Gold prices. We expect gold prices to remain firm in the near-term as the trend remains up. We expect MCX December gold prices to trade in the range of Rs 16,150 – Rs 17,105 per 10 gram in the coming week.
Copper
On a year-to-date basis, Copper prices have risen more than 100% and are currently trading at $6,595. Copper prices are cushioned by supply worries despite rising inventories. Though the bulls are heavily reliant on the weaker dollar for a rally further, the red metal has support in terms of labour disputes. We expect copper prices to trade with a positive bias but a sharp upside will be capped on the back of weak unemployment rate from the US. Support factor: Talks to end the strike at Chile’s Spence copper mine have failed and risks for a strike at Peru’s Antamina mine are rising as wage negotiations have come to a standstill. Hence, copper prices could trade higher next week. Workers at BHP's Spence mine in Chile have been on strike since October 13 with still no resolution in sight. Peru's Compania Minera Antamina is hopeful that a deal can be reached. However contract proposals are under revision before wage negotiations continue next week. We expect MCX November Copper prices to trade in the range of Rs 304 – Rs 317 per kg in the coming week.
Crude Oil
Oil prices touched a high of $81.06/bbl this week as a decline in inventories coupled with optimism that fuel demand will increase helped support upside. The US Energy Department weekly inventory report showed this week that oil inventories declined, thereby giving hopes of a rebound in demand. In the coming week, oil prices will take cues from the US economic data, dollar movement and crude oil inventories. The bulls will entirely depend on the movement in the dollar in the coming week. We do not expect the dollar to trade with sharp weakness in the coming week as technically, the index has weakened sharply and hopes of a pullback of stimulus measures by the US Federal Reserve in the coming year may also protect a sharp downside in the currency. Oil prices will continue to face resistance above $80/bbl levels in the coming week. We expect November crude oil prices to trade in the range of Rs 3640 – Rs 3900 in the coming week.
Soybean
Soybean (NCDEX December contract) futures opened the week at 2273 levels then witnessed a sharp rally towards 2347 levels and managed to close with a gain of 3% in the last week as compared to previous week. Prices surged on account of lower production estimates and better export figure of oil-meals in the month of October also provided support to bulls in the market. As per the 47th All India Convention of Kharif oilseeds by Central Organization for Oil Industry & Trade (COOIT) held at Indore on 1st November 2009, Domestic soybean production estimates declined to 85 lakh tonnes for this year from 89 lakh tonnes last year.
Domestic Kharif Oilseeds crop is estimated at 136.5 lakh tonnes for the year 2009-10 against 150.30 lakh tonnes last year (2008-09). Overall oilseeds yield has reduced to 780 kgs during current kharif crop from 815 kgs/ha last year. Higher export figures of oil-meals in the month of October also added bullish market sentiments. As per the Solvent Extractors' Association, India's oil-meal exports during October doubled to 3.10 lakh metric tons from 1.53 lakh metric tons a year earlier. However, oil-meal exports in the first seven months of the fiscal year (April to October) declined to 15 lakh tonnes from 27 lakh tonnes a year earlier. India exports oil-meal mainly to the South East Asian countries. NCDEX December Contract shall find strong support at 2270/2230 and resistance at 2400/2450.
Chana
Chana futures gained almost 7% in the last 2 weeks on the concerns of lower acreage under Chana in Rajasthan and firm prices of Kharif Pulses. Farmers in Rajasthan have so far completed sowing of Chana on 2.2 lakh hectares, down 39 percent during the same period last year. Rajasthan is the second largest Chana producing state in India and contributes almost 15% of the total acreage under Chana. The prices of Kharif Pulses are ruling high due to lower output estimates. According to the first advance estimates, Kharif Pulses output is expected to decline to 44.2 lakh tonnes against 47.8 lakh tonnes produced last year.
The government hiked the Minimum Support Price (MSP) of Chana by Rs 30 per quintal at Rs. 1760 per qtl as sowing for the Rabi season has begun. Chana prices are likely to remain firm in the short term (2 weeks) and could recover further by Rs. 100 per qtl on good demand for cheaper substitute and on lower acreage under Chana. However, in the medium term, no major upside is expected in the Chana prices as India is having huge stocks of Chana from the last year’s bumper harvest. NCDEX December Contract shall find strong support at 2660/2590 and resistance at 2770/2800.
Pepper
The bull-phase for pepper isn’t over as prices rose 7% this week although pepper futures have fallen on profit taking and selling pressure towards weekend on availability of cheaper pepper reported from other major origins. The November contract at National Commodity and Derivatives Exchange lost Rs 275 to close at Rs 14798 while December contract lost Rs 274 to trade at Rs 14990 on Friday. The November contract had traded at Rs 15300 plus levels and December close to Rs 15600 levels this week but has fallen on reports of cheaper prices for Brazil, Vietnam and Indonesian origins. Indian origin is being quoted at $3,350 per tonne while Brazil is being quoted at $3000 thus capping the bull run in pepper spot and futures. On Friday, Spot pepper fell by over 13 rupees and ended at 14,991.8 rupees per 100 kg in Kochi, a major trading hub in Kerala. The prices were ruling at 15100 levels at the beginning of the week.
Next week, there could be a reversal of trend with prices climbing back to Rs 15100 levels as global stock and demand continues to be mismatched. Major Europe, US consumers need 15,000 tonnes monthly while total availability as of now is 45000 tonnes. Supply situation is expected to ease only by February when Vietnam harvest begins.
Wheat
Wheat futures witnessed two weeks of volatility aided by pre-dominant bullish sentiments as makets awaited the government announcement of minimum support price for wheat and on Tuesday November futures at National Commodity and Derivatives Exchange rose to Rs 1443 per quintal but thereafter profit taking and lower than expected support price hurt market sentiments. Towards weekend, the November contract ended lower at Rs 1425 per quintal. Farmers were expected a support price of Rs 1180-2000 per quintal while the announcement fell far short at Rs 1100 as against prevailing support price of Rs 1080. Delay in release of buffer stock into open market aided bullish sentiments and kept prices from falling. The government paid farmers 1,080 rupees per 100 kg for the 2009 harvest. Some traders said they had expected the support price to be raised to 1,180 rupees and hence are expecting the government to offer a bonus above the support price to boost acreage and procurement.
India aims to raise wheat output by 2 million tonnes this year to 82.58 mn tonnes, India’s Agriculture Minister Sharad Pawar said recently.
The delay in release of 3 million tonnes for a 6-month period beginning October has also supported the recent rally in wheat. As on October 1, India had 28.18 million tonnes of wheat stocks, while the buffer norm was 11 million tonnes. At the beginning of the new marketing year in April 2010, stocks are estimated at 10 million tonnes. Wheat futures will go range-bound on inadequate support price and hopes of rise in rabi output.
Showing posts with label crude oil. Show all posts
Showing posts with label crude oil. Show all posts
Sunday, 8 November 2009
Sunday, 9 August 2009
Commodity Trends:Are we in for shortages in 2010
Commodity shortages are likely next year as output of metals and agricultural products potentially rises too slowly to match revival of demand, according to a Goldman Sachs Group study. The Reuters/Jefferies CRB Index of 19 commodities has added 17 percent this year, driven by energy and metals prices. Limits on production growth and swelling demand in developing nations will keep driving prices higher and probably curb usage in industrialized countries like the U.S., Goldman Sachs said.
Meanwhile, in India scanty rains are a cause for concern in some major crop growing regions and Finance Minister Pranab Mukherjee hinted that it would be damaging for economic growth which had begun to look up due to stimulus measures.
India's exports fell for ninth month in a row. Commerce Ministry said, exports in June dipped 27.7%. Imports also dropped by 29.3%, reflecting slowdown in domestic consumption and mainly because a 51% decrease in oil import.
As fall in imports is steeper than that in exports, the trade deficit in June 2009 has contracted to $6.2 billion from $9.1 billion in the same month of the last financial year. Exports dipped to $12.8 billion in June from $17.7 billion in the same month last year
A few major developments related to commodity exchanges last week. It was announced that commodity bourses such as MCX, NCDEX and NMCE can now hold equity stake in one another as the government has allowed cross-holding in national level commodity exchanges that have completed five years. The new guidelines on equity structure issued recently by the consumer affairs ministry, the stock and commodity exchanges can hold a maximum equity of up to 15% in commodity bourses that have completed five years.
Forward Markets Commission (FMC), India's commodity market regulator, has asked national-level commodity exchanges to ensure at least 10 percent of their stake is owned by government companies. Total stake by state firms, banks and warehouses together should be at least 26 percent, while only the original promoter of the exchange can hold upto 26 percent, it added.
The guidelines were aimed at better governance, transparency and investor confidence in the markets. Volumes in India's commodity futures, one of the fastest growing in the world, rose 29 percent in 2008/09 financial year ending March to 52.49 trillion rupees.
Precious Metals
The Bullion pack traded higher for the past week with Spot Gold trading above $935 levels. Silver prices also moved in tandem with gold prices trading higher. The sharp fall in the Dollar Index (the USD pegged against 6 major currencies) supported the rally in the bullion pack as assets traded in USD dollar terms appreciate in value terms when the Dollar weakens. A further sustained fall in the USD would lead to a sharp rally in the bullion pack. Investment/Fabrication demand shall continue to play a crucial role in coming weeks. Also, broad-based buying was also witnessed across the commodities pack is currently being witnessed as risk appetite of global investors is on the rise, which has been pressurizing the USD. Higher crude prices and overall improvement in sentiments have been supportive for the bullion pack. Spot Gold shall meet with resistance around $975 - $980 zone, and further trading above this level would lead prices towards the $1000 mark. Domestic gold prices breached the Rs.15,000 mark last week. For this week, we expect prices to trade higher with resistance seen at 15070/15220 whereas support is seen at 14750/14590.
Base Metals
The Base metals pack last week rallied sharply on the back of improving global economic sentiments & weakness in the US Dollar. In the last few days, the base metals market has been running on a very optimistic note due to a steady stock market recovery but, with only moderate seeds of consumer demand. The market also seems almost immune to any negative data. Despite slower summer physical conditions evidenced on the back of rising inventories and falling cancelled warrants, prices are witnessing an uptrend. However, we feel that base metals could come under pressure as prices are racing ahead of their fundamentals. Hence, prices may be due for a correction this week on account of profit-booking. Copper, the leader of the base metals pack, shall have crucial support around 281/273 levels whereas resistance is seen around 297/305 levels for this week.
Soybean
Soybean (NCDEX Sep contract) futures opened the week at Rs 2334 a quintal, and surged more than 5% during the last week as compared to previous week on account of short covering and strong movement of soybean futures at Chicago Board of trade (CBOT). Better demand from solvent extractors amid tight supply led to spurt in prices. Traders are resorting to hoarding, as there is a growing concern in respect with the paucity of rainfall.
Moreover, market participants are anticipating that the government may declare a drought. As per IMD report, the rainfall for the week to August 5 was 66% below normal. As per Agriculture Ministry of India, area covered under domestic kharif oilseeds is 141.79 lakh hectares till July 31, 2009, as compared with 144.66 lakh hectare during corresponding period a year ago. In this respect, area under Soybean is reported up at 90.74 lakh hectare against 87.75 lakh hectare a year ago. As per Brazil’s crop supply agency, soybean crop estimates for 2008/09 was about unchanged at 57.13 million tonnes compared to record 60.02 million tonnes in 2007/08. In the coming week, prices are expected to move higher on account of lower soybean stocks and better demand from solvent extractors. NCDEX September Soybean prices has a support at 2350/2300 and resistance is seen at 2510/2550 levels.
Chana
Chana futures gained over 5% during the last week due to weak rainfall in key pulses growing areas, which have led to the speculation that the Kharif output would be lower in the coming season. September contract recovered from its low of Rs. 2475 per qtl levels and settled at around 2600 levels on Friday. Chana output in Rabi 2008-09 stands at around 70 lakh tonnes. Thus, there are huge stocks of Chana or gram in the domestic markets. Despite this, Chana prices are not able to sustain at the lower levels due to the soaring prices of other Pulses.
Delayed monsoon and thereby delay in the sowing of Kharif Pulses like Tur, moong and Urad has led to the speculation that there might be supply shortage in the coming months. Chana is the only pulses crop which is such available at such lower prices. Thus, sellers are not ready to sell Chana at the current prices, thereby restricting the supplies. On the other hand, demand is vibrant from the processors and millers ahead of the festive season. The government measures to control the rising pulses prices might pressurize Chana prices to some extent. However, any significant decline should be treated as a good buying opportunity. We expect September Chana contract to trade in the range of Rs. 2530-2700 per qtl in the coming week.
Pepper
Spot pepper prices at Kochi surged due to buying by the stockists and increase in the pepper parity of various origin. There are reports that the pepper crop in Brazil is expected to be lower due to heavy rains in Para state, which is major producing area of pepper in Brazil. Fresh arrivals of pepper in the Brazil will commence in the month of September. Vietnam has lower stocks of pepper to sell, as it has already exported around 65000 tonnes of pepper from its fresh crop of 110000 tonnes during this year. Thus it would not aggressively sell pepper. Indian pepper in the international market is quoting at $3075/tonne (C&F). Strong demand from the overseas and domestic market is expected in the coming days. Pepper futures have touched a high of Rs.14,750/qtl, breaking an important resistance level of Rs. 14,400/qtl. Prices may trade in sideways to upward trend in the coming days. Technically prices may have a strong support at 14,400/3,800 levels. Resistance may be seen at 15080/15,600 levels.
Rubber
Rubber spot market witnessed weak to mixed trends throughout the weak despite bull rally in TOCOM futures. Absence of quantity buyers in main marketing centres was responsible for sudued sentiments. Spot prices which had improed to Rs 101 in the beginning of the week later weakened to Rs 100.
The physical rubber prices were weak on Thursday. According to observers there were no quantity buyers in the main marketing centres to keep the market firm though the domestic and international futures were in a bullish mood. Sheet rubber declined to Rs 100 from Rs 100.50 a kg on buyer resistance.
The August futures for RSS 4 firmed up to Rs 102.10 (101.28), September to Rs 99.73 (98.66), October to Rs 97.05 (96.63) and November to Rs 97 (96.52) a kg on National Multi Commodity Exchange (NMCE) on Thursday.
Despite rising imports, prices of natural rubber have remained buoyant throughout the past few months on the back of a shortfall in the global production.
The import of rubber by tyre companies has touched about 79,573 tonnes during April to August 4, 2009 as compared to 24,264 tonnes during the same period of the year-ago period, growing at a rate of 228%. Stocks of natural rubber now stands at 1.8 lakh tonnes, against 1.2 lakh tonnes during the same period of last year. Lower exports also added to the stocks.
Despite such a major increase in import and stocks, the rubber price has not seen a downturn. After hovering around Rs 98 to Rs 99 per kg in the past one month, the price touched Rs 100 per kg-mark on August 1. On Thursday, the price stood at Rs 100 per kg.
AT TOCOM, prices slipped 2.5 percent on Friday after reaching a nine month high on Tuesday, booking its first weekly decline in five weeks, on speculation a U.S. jobs report may revive concern that worsening unemployment will curb consumer spending and cap demand for the commodity. Investors are cutting long positions on doubts about fall in spending.
January-delivery rubber fell as much as 4.8 yen to 191 yen a kilogram ($2,003 a metric ton) on the Tokyo Commodity Exchange before settling at 191.9 yen. The decline was fast as investor resistance was stiff above 200 yen.
Rubber gained 21 percent in July, the most since December 2006, and have jumped 44 percent this year as global equities rallied and exporters, including Thailand, curbed shipments. Rubber is expected to exhibit weakness and range-bound trading close to Rs 100 levels is likely next week.
Crude Oil
Crude oil began the week on a rosy note and hit a one-month high of $71 on Monday as positive Chinese data and firm equities signaled economic recovery and higher energy demand. US Crude hit a intra-day high of $71.95 before settling at $71.50.
Brent crude was getting close to resistance levels and continued support from equities were required to stabilize prices.
On Friday, Crude oil fell below to$71 per barrel on the New York Mercantile Exchange after attaining a 5-week high although equities fared well in Wall Street. Light, sweet crude traded lower, losing $1.01 to reach $70.86 per barrel. Heating oil prices lost 0.0163 cents to $1.9145 per gallon. Reformulated gasoline prices fell 0.0524 cents to $2.003 per gallon. Natural gas prices lost 0.0866 cents to $3.70 per million British thermal units.
The dollar gaining against euro reduced the appeal of commodities, a forecast showing a weaker Atlantic hurricane season offset an upbeat US job report. The U.S. National Oceanic and Atmospheric Administration (NOAA) said that it now expects a near- to below-normal hurricane season, as the effect of the El Niño weather pattern continues to develop. Meanwhile US weekly employment data was supportive and prevented sharp fall in oil prices. The four-week average of new claims dropped to 555,250, the lowest level since January.
Oil Futures have so far gained 59% this year. The speed of the oil price surge in recent times also made it susceptible to correction. In the near term, weakness is likely in the oil segment with possibility of prices declining to $60 and then rebounding.
Meanwhile, in India scanty rains are a cause for concern in some major crop growing regions and Finance Minister Pranab Mukherjee hinted that it would be damaging for economic growth which had begun to look up due to stimulus measures.
India's exports fell for ninth month in a row. Commerce Ministry said, exports in June dipped 27.7%. Imports also dropped by 29.3%, reflecting slowdown in domestic consumption and mainly because a 51% decrease in oil import.
As fall in imports is steeper than that in exports, the trade deficit in June 2009 has contracted to $6.2 billion from $9.1 billion in the same month of the last financial year. Exports dipped to $12.8 billion in June from $17.7 billion in the same month last year
A few major developments related to commodity exchanges last week. It was announced that commodity bourses such as MCX, NCDEX and NMCE can now hold equity stake in one another as the government has allowed cross-holding in national level commodity exchanges that have completed five years. The new guidelines on equity structure issued recently by the consumer affairs ministry, the stock and commodity exchanges can hold a maximum equity of up to 15% in commodity bourses that have completed five years.
Forward Markets Commission (FMC), India's commodity market regulator, has asked national-level commodity exchanges to ensure at least 10 percent of their stake is owned by government companies. Total stake by state firms, banks and warehouses together should be at least 26 percent, while only the original promoter of the exchange can hold upto 26 percent, it added.
The guidelines were aimed at better governance, transparency and investor confidence in the markets. Volumes in India's commodity futures, one of the fastest growing in the world, rose 29 percent in 2008/09 financial year ending March to 52.49 trillion rupees.
Precious Metals
The Bullion pack traded higher for the past week with Spot Gold trading above $935 levels. Silver prices also moved in tandem with gold prices trading higher. The sharp fall in the Dollar Index (the USD pegged against 6 major currencies) supported the rally in the bullion pack as assets traded in USD dollar terms appreciate in value terms when the Dollar weakens. A further sustained fall in the USD would lead to a sharp rally in the bullion pack. Investment/Fabrication demand shall continue to play a crucial role in coming weeks. Also, broad-based buying was also witnessed across the commodities pack is currently being witnessed as risk appetite of global investors is on the rise, which has been pressurizing the USD. Higher crude prices and overall improvement in sentiments have been supportive for the bullion pack. Spot Gold shall meet with resistance around $975 - $980 zone, and further trading above this level would lead prices towards the $1000 mark. Domestic gold prices breached the Rs.15,000 mark last week. For this week, we expect prices to trade higher with resistance seen at 15070/15220 whereas support is seen at 14750/14590.
Base Metals
The Base metals pack last week rallied sharply on the back of improving global economic sentiments & weakness in the US Dollar. In the last few days, the base metals market has been running on a very optimistic note due to a steady stock market recovery but, with only moderate seeds of consumer demand. The market also seems almost immune to any negative data. Despite slower summer physical conditions evidenced on the back of rising inventories and falling cancelled warrants, prices are witnessing an uptrend. However, we feel that base metals could come under pressure as prices are racing ahead of their fundamentals. Hence, prices may be due for a correction this week on account of profit-booking. Copper, the leader of the base metals pack, shall have crucial support around 281/273 levels whereas resistance is seen around 297/305 levels for this week.
Soybean
Soybean (NCDEX Sep contract) futures opened the week at Rs 2334 a quintal, and surged more than 5% during the last week as compared to previous week on account of short covering and strong movement of soybean futures at Chicago Board of trade (CBOT). Better demand from solvent extractors amid tight supply led to spurt in prices. Traders are resorting to hoarding, as there is a growing concern in respect with the paucity of rainfall.
Moreover, market participants are anticipating that the government may declare a drought. As per IMD report, the rainfall for the week to August 5 was 66% below normal. As per Agriculture Ministry of India, area covered under domestic kharif oilseeds is 141.79 lakh hectares till July 31, 2009, as compared with 144.66 lakh hectare during corresponding period a year ago. In this respect, area under Soybean is reported up at 90.74 lakh hectare against 87.75 lakh hectare a year ago. As per Brazil’s crop supply agency, soybean crop estimates for 2008/09 was about unchanged at 57.13 million tonnes compared to record 60.02 million tonnes in 2007/08. In the coming week, prices are expected to move higher on account of lower soybean stocks and better demand from solvent extractors. NCDEX September Soybean prices has a support at 2350/2300 and resistance is seen at 2510/2550 levels.
Chana
Chana futures gained over 5% during the last week due to weak rainfall in key pulses growing areas, which have led to the speculation that the Kharif output would be lower in the coming season. September contract recovered from its low of Rs. 2475 per qtl levels and settled at around 2600 levels on Friday. Chana output in Rabi 2008-09 stands at around 70 lakh tonnes. Thus, there are huge stocks of Chana or gram in the domestic markets. Despite this, Chana prices are not able to sustain at the lower levels due to the soaring prices of other Pulses.
Delayed monsoon and thereby delay in the sowing of Kharif Pulses like Tur, moong and Urad has led to the speculation that there might be supply shortage in the coming months. Chana is the only pulses crop which is such available at such lower prices. Thus, sellers are not ready to sell Chana at the current prices, thereby restricting the supplies. On the other hand, demand is vibrant from the processors and millers ahead of the festive season. The government measures to control the rising pulses prices might pressurize Chana prices to some extent. However, any significant decline should be treated as a good buying opportunity. We expect September Chana contract to trade in the range of Rs. 2530-2700 per qtl in the coming week.
Pepper
Spot pepper prices at Kochi surged due to buying by the stockists and increase in the pepper parity of various origin. There are reports that the pepper crop in Brazil is expected to be lower due to heavy rains in Para state, which is major producing area of pepper in Brazil. Fresh arrivals of pepper in the Brazil will commence in the month of September. Vietnam has lower stocks of pepper to sell, as it has already exported around 65000 tonnes of pepper from its fresh crop of 110000 tonnes during this year. Thus it would not aggressively sell pepper. Indian pepper in the international market is quoting at $3075/tonne (C&F). Strong demand from the overseas and domestic market is expected in the coming days. Pepper futures have touched a high of Rs.14,750/qtl, breaking an important resistance level of Rs. 14,400/qtl. Prices may trade in sideways to upward trend in the coming days. Technically prices may have a strong support at 14,400/3,800 levels. Resistance may be seen at 15080/15,600 levels.
Rubber
Rubber spot market witnessed weak to mixed trends throughout the weak despite bull rally in TOCOM futures. Absence of quantity buyers in main marketing centres was responsible for sudued sentiments. Spot prices which had improed to Rs 101 in the beginning of the week later weakened to Rs 100.
The physical rubber prices were weak on Thursday. According to observers there were no quantity buyers in the main marketing centres to keep the market firm though the domestic and international futures were in a bullish mood. Sheet rubber declined to Rs 100 from Rs 100.50 a kg on buyer resistance.
The August futures for RSS 4 firmed up to Rs 102.10 (101.28), September to Rs 99.73 (98.66), October to Rs 97.05 (96.63) and November to Rs 97 (96.52) a kg on National Multi Commodity Exchange (NMCE) on Thursday.
Despite rising imports, prices of natural rubber have remained buoyant throughout the past few months on the back of a shortfall in the global production.
The import of rubber by tyre companies has touched about 79,573 tonnes during April to August 4, 2009 as compared to 24,264 tonnes during the same period of the year-ago period, growing at a rate of 228%. Stocks of natural rubber now stands at 1.8 lakh tonnes, against 1.2 lakh tonnes during the same period of last year. Lower exports also added to the stocks.
Despite such a major increase in import and stocks, the rubber price has not seen a downturn. After hovering around Rs 98 to Rs 99 per kg in the past one month, the price touched Rs 100 per kg-mark on August 1. On Thursday, the price stood at Rs 100 per kg.
AT TOCOM, prices slipped 2.5 percent on Friday after reaching a nine month high on Tuesday, booking its first weekly decline in five weeks, on speculation a U.S. jobs report may revive concern that worsening unemployment will curb consumer spending and cap demand for the commodity. Investors are cutting long positions on doubts about fall in spending.
January-delivery rubber fell as much as 4.8 yen to 191 yen a kilogram ($2,003 a metric ton) on the Tokyo Commodity Exchange before settling at 191.9 yen. The decline was fast as investor resistance was stiff above 200 yen.
Rubber gained 21 percent in July, the most since December 2006, and have jumped 44 percent this year as global equities rallied and exporters, including Thailand, curbed shipments. Rubber is expected to exhibit weakness and range-bound trading close to Rs 100 levels is likely next week.
Crude Oil
Crude oil began the week on a rosy note and hit a one-month high of $71 on Monday as positive Chinese data and firm equities signaled economic recovery and higher energy demand. US Crude hit a intra-day high of $71.95 before settling at $71.50.
Brent crude was getting close to resistance levels and continued support from equities were required to stabilize prices.
On Friday, Crude oil fell below to$71 per barrel on the New York Mercantile Exchange after attaining a 5-week high although equities fared well in Wall Street. Light, sweet crude traded lower, losing $1.01 to reach $70.86 per barrel. Heating oil prices lost 0.0163 cents to $1.9145 per gallon. Reformulated gasoline prices fell 0.0524 cents to $2.003 per gallon. Natural gas prices lost 0.0866 cents to $3.70 per million British thermal units.
The dollar gaining against euro reduced the appeal of commodities, a forecast showing a weaker Atlantic hurricane season offset an upbeat US job report. The U.S. National Oceanic and Atmospheric Administration (NOAA) said that it now expects a near- to below-normal hurricane season, as the effect of the El Niño weather pattern continues to develop. Meanwhile US weekly employment data was supportive and prevented sharp fall in oil prices. The four-week average of new claims dropped to 555,250, the lowest level since January.
Oil Futures have so far gained 59% this year. The speed of the oil price surge in recent times also made it susceptible to correction. In the near term, weakness is likely in the oil segment with possibility of prices declining to $60 and then rebounding.
Saturday, 8 August 2009
Crude Oil May Climb to $95 in Early 2010: Technical Analysis
Crude oil may reach $95 a barrel by early next year after rising to a seven-week high this week, according to technical analysis by Auerbach Grayson.
Oil is set to reach $83 a barrel, which corresponds with the 38.2 percent Fibonacci retracement of the range generated by the September contract’s high of $145.96 on July 14, 2008, and the low of $44.28 touched on Feb. 18. The next target of $95 would be a 50 percent retracement.
“The oil market is in a strong position for a further move to the upside,” Richard Ross, a technical analyst at Auerbach Grayson, a brokerage in New York, said in a telephone interview. “There was a 70 percent pullback from the peak last summer to the trough. A 50 percent retracement brings you right to $95.”
Crude oil for September delivery fell 3 cents to $71.94 a barrel yesterday on the New York Mercantile Exchange. Futures topped $70 on Aug. 3 for the first time since July 1, which was a breakout from a ‘symmetrical triangle formation,’ Ross said.
“We were able to break out on the upside Monday and more significantly, we broke out and held those gains,” Ross said. “This shows the ability of the oil market, along with equities, to shrug off bad news and focus in the good news. This is a good sign for technicians.”
The Fibonacci sequence was identified by Italian mathematician Leonardo Fibonacci in the 13th century. The ratio between the numbers, about 0.618, is known as the golden mean, and is also used by technical analysts to find levels of resistance and support.
Sunday, 26 July 2009
Commodity Trends:Outlook positive on equity rally
Globally stock markets are rallying raising hopes of economic recovery India’s BSE sensex has now overcome the 15,000 mark wile Do Jones industrials climbed above 9,000 for the first time since January. This trend was also now visible across several key commodities including gold, basemetals, pepper and wheat whose prices showed buoyancy and intermittent volatility.
Though the prices of select mass consumption food items such as pulses, fruits, potatoes and rice continued to rise week-on-week, the high base effect kept the wholesale price index (WPI)-based annual rate of inflation below zero for the sixth consecutive week. Weak progress of monsoon has prompted the India Government to stop all exports of non-Basmati rice and wheat, and bear half of the subsidy on diesel offered to farmers by the states.
Allaying fears of shortage of foodgrains, Pawar said, "Stock position is quite comfortable. We have sufficient stock position for 13 months in our kitty."
Precious Metals
The bullion pack traded higher during last week with Spot Gold breaching the $950 mark, on the back of weakness in the US Dollar against other major currencies. The Bullion pack continues to closely track the movements in the currencies markets. Investor interest from exchange traded commodity funds (ETFs) whose demand for gold increased 540 percent between the first quarter of 2008 and the same quarter in 2009 is also likely to be supportive of gold prices. Investment side demand is showing some signs of revival but the jewellery/fabrication demand continues to remain tepid.
The Bullion pack rally now appears to be stalled as Spot Gold is unable to trade consistently above the wall of resistance around $955 - $956 levels as we are witnessing profit booking along with reluctance of bulls to build fresh long positions around these levels. The bullion pack though continues to close consistently above their 10-Day Moving Average indicating that the short-term uptrend remains intact. The Dollar Index (DX) is currently trading around 78.60 levels, very close to its recent low of 78.33 on June 2nd, which is acting as short-term bottom. Trading below this level would lead to a sharp weakness in the USD, in turn supportive for the bullion pack.
Base Metals
The uptrend in base metals has continued on the back of a strong bullish momentum. Nickel and Aluminum have already reached their best levels this year and Copper is not far off from the nine-month highs that it set on Thursday. The rally in base metals indicates that sentiments have improved significantly and are bullish and widespread. Asian equity markets gained in today’s session as wider financial market trends provided a robust backdrop. News of supply constraints have risen this week due to shutdowns at two of Chile’s biggest mines. This factor is supportive for copper prices. Copper price are rising on the back of this news.
Base metal prices could remain upbeat but may come under selling pressure by the end of the week as 1) profit booking after higher prices could come in and 2) prices may come under pressure as we approach the weekend and funds may liquidate their positions prior to the weekend. However, the overall trend is expected to remain bullish on the back of better-than-expected corporate results. The global economy is on its road to recovery but the pace of improvement could be slow. The Federal Reserve Chairman has indicated that the pace of the economic decline in the United States has slowed down significantly and the final demand of production has shown tentative signs of stabilization. But the labour market continues to look weak and the unemployment rate could rise going forward. The currency and equity markets play a crucial role in determining price direction.
Crude Oil
Crude Oil prices rose to three week high in the last week, as surging equity markets amid better earnings reports and weaker dollar against major currencies supported oil prices. NYMEX September crude oil prices rose above $67 per barrel. Rally in oil prices came despite energy data is showing weak demand. Meanwhile OPEC has decided to trim shipments by 1.7 percent in the four weeks ending Aug. 8. OPEC will reduce its exports to 22.39 million bpd from 22.78 million bpd. It is the sixth consecutive drop reported in oil exports.
Crude Oil prices continue to take cues from trend in the equity markets. Recent strong earnings results of corporate have boosted equity market confidence and helped oil prices to gain. But inventory data has shown that gasoline and oil products stocks are at record high levels amid weak demand. Despite US driving season is underway demand for gasoline continues to remain tepid. Although OPEC is deciding to reduce oil exports, it will do little to balance the market. CFTC will have three hearings in next couple of weeks on curbing speculation activity in energy commodities and outcome of this event can impact oil prices. We believe that oil prices are having resistance near $70 mark in the near term and if prices close below $62 levels then can head towards $58 per barrel level. MCX August Crude Oil can get support around Rs3160/3050 levels, whereas resistance is seen at Rs.3325/3380 per barrel.
Though the prices of select mass consumption food items such as pulses, fruits, potatoes and rice continued to rise week-on-week, the high base effect kept the wholesale price index (WPI)-based annual rate of inflation below zero for the sixth consecutive week. Weak progress of monsoon has prompted the India Government to stop all exports of non-Basmati rice and wheat, and bear half of the subsidy on diesel offered to farmers by the states.
Allaying fears of shortage of foodgrains, Pawar said, "Stock position is quite comfortable. We have sufficient stock position for 13 months in our kitty."
Precious Metals
The bullion pack traded higher during last week with Spot Gold breaching the $950 mark, on the back of weakness in the US Dollar against other major currencies. The Bullion pack continues to closely track the movements in the currencies markets. Investor interest from exchange traded commodity funds (ETFs) whose demand for gold increased 540 percent between the first quarter of 2008 and the same quarter in 2009 is also likely to be supportive of gold prices. Investment side demand is showing some signs of revival but the jewellery/fabrication demand continues to remain tepid.
The Bullion pack rally now appears to be stalled as Spot Gold is unable to trade consistently above the wall of resistance around $955 - $956 levels as we are witnessing profit booking along with reluctance of bulls to build fresh long positions around these levels. The bullion pack though continues to close consistently above their 10-Day Moving Average indicating that the short-term uptrend remains intact. The Dollar Index (DX) is currently trading around 78.60 levels, very close to its recent low of 78.33 on June 2nd, which is acting as short-term bottom. Trading below this level would lead to a sharp weakness in the USD, in turn supportive for the bullion pack.
Base Metals
The uptrend in base metals has continued on the back of a strong bullish momentum. Nickel and Aluminum have already reached their best levels this year and Copper is not far off from the nine-month highs that it set on Thursday. The rally in base metals indicates that sentiments have improved significantly and are bullish and widespread. Asian equity markets gained in today’s session as wider financial market trends provided a robust backdrop. News of supply constraints have risen this week due to shutdowns at two of Chile’s biggest mines. This factor is supportive for copper prices. Copper price are rising on the back of this news.
Base metal prices could remain upbeat but may come under selling pressure by the end of the week as 1) profit booking after higher prices could come in and 2) prices may come under pressure as we approach the weekend and funds may liquidate their positions prior to the weekend. However, the overall trend is expected to remain bullish on the back of better-than-expected corporate results. The global economy is on its road to recovery but the pace of improvement could be slow. The Federal Reserve Chairman has indicated that the pace of the economic decline in the United States has slowed down significantly and the final demand of production has shown tentative signs of stabilization. But the labour market continues to look weak and the unemployment rate could rise going forward. The currency and equity markets play a crucial role in determining price direction.
Crude Oil
Crude Oil prices rose to three week high in the last week, as surging equity markets amid better earnings reports and weaker dollar against major currencies supported oil prices. NYMEX September crude oil prices rose above $67 per barrel. Rally in oil prices came despite energy data is showing weak demand. Meanwhile OPEC has decided to trim shipments by 1.7 percent in the four weeks ending Aug. 8. OPEC will reduce its exports to 22.39 million bpd from 22.78 million bpd. It is the sixth consecutive drop reported in oil exports.
Crude Oil prices continue to take cues from trend in the equity markets. Recent strong earnings results of corporate have boosted equity market confidence and helped oil prices to gain. But inventory data has shown that gasoline and oil products stocks are at record high levels amid weak demand. Despite US driving season is underway demand for gasoline continues to remain tepid. Although OPEC is deciding to reduce oil exports, it will do little to balance the market. CFTC will have three hearings in next couple of weeks on curbing speculation activity in energy commodities and outcome of this event can impact oil prices. We believe that oil prices are having resistance near $70 mark in the near term and if prices close below $62 levels then can head towards $58 per barrel level. MCX August Crude Oil can get support around Rs3160/3050 levels, whereas resistance is seen at Rs.3325/3380 per barrel.
Sunday, 5 July 2009
Commodity Trends:Hopes high on CTT removal
The Railway Budget and Economic Survey 2008-09 have raised hopes of a reformist budget from Finance Minister Pranab Mukherjee on Monday. The Survey has favoured regulation of the commodity futures market by the Securities and Exchange Board of India (Sebi), lifting of ban on futures trading of rice, tur and urad, extension of spot commodity trading in electronic form to agricultural markets by involving APMCs and complete removal of the commodity transaction tax (CTT).
Since Commodity Futures also are part of the financial market, it should be regulated by SEBI, according to the Survey. The Survey hints at removal of commodity transaction tax (CTT) which was vehemently opposed by the industry when the concept was introduced in 2008 budget but not yet notified.
Last week, among the major exchange-related news include MCX launching futures in gasoline. There were also reports that Universal Commodity Exchange has approached the Forward Markets Commission (FMC) to set up India's sixth national level commodity exchange which is promoted by IT entrepreneurs.
Meanwhile, state-run MMTC Ltd, the country’s biggest importer of gold, said it will import 150 tonnes of the yellow metal during the 2009-10 fiscal, the same quantity it imported last fiscal.
Precious Metals
The overall Bullion pack was under pressure last week with Gold continuing to trade sideways whereas Silver witnessed a sharper fall. Weak US economic data and sharp fall in US stock markets made investors rush towards the safe refuge of the US Dollar. Earlier in the week, reports that China has asked to debate proposals for a new global reserve currency at next week’s Group of Eight summit in Italy had supported the Bullion pack. Further, holdings in the world's largest gold-backed exchange-traded fund (SDPR) have been falling in the past few weeks as growing optimism about the global economy saps investors' appetite for the safe-haven asset. Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged at 1,120.55 metric tons.
Spot Gold continues to trade in the range of $912 - $948 zone. Overall, gold has benefitted from persisting worries that heavy government borrowing could boost inflation. Physical demand from India has been weak with imports down 50% year-on-year in the first half of this year compared with the first six months of 2008, as per the Bombay Bullion Association. For the week, we expect Spot Gold prices to have immediate support at $920/$908 whereas resistance is seen at $944/$958. Spot Silver prices shall find support at $13.00/$12.70 whereas resistance is seen at $13.65/$13.95. MCX August Gold has support at 14350/14260 whereas resistance is seen at 14580/14710. MCX Sep Silver shall find support at 21220/20750 whereas resistance is seen at 21950/22410 levels.
Crude Oil
Crude Oil prices pared early gains and tumbled in the last week, reaching to their lowest level in one month and marking its third successive weekly loss, as bearish weekly inventory data and relatively strong dollar against major currencies exerted pressure on oil prices. Oil prices are also taking cues from equity markets and weak global equity markets dented risk sentiments in the market and weighed on oil prices. NYMEX May Crude Oil futures ended the week 5.10% lower than the previous week to close at $65.63 per barrel, the lowest closing level since 3rd June.
Crude Oil prices are facing downward pressure once prices reach above $70 mark, as recent economic data is still mixed and raising concerns in the mind of investors with regard to early economic recovery. With unemployment rates are at multi year high, consumers are unlikely to expedite consumption in the near term, which can certainly curb the energy demand. Global risk sentiment is on the edge and if equity markets peak off, then we can see fall in risk appetite, which can potentially reduce demand for higher yielding assets like commodities.
Weekly inventory data in US is showing that energy demand in world’s largest oil consuming nation is still more than 5% less than last year. Despite US summer driving season is underway, gasoline demand is not picking up, which is certainly not a positive sign. Traders will also have to look out for trend in dollar, as rising dollar can also weigh on oil prices. Rising geopolitical tension in the Nigeria is the only possible factor which can lend support to oil prices. Due to above mentioned factors; we expect that oil prices can face resistance near $70 levels and it can eventually head downwards towards $60-61 levels.
Soybean
Soybean (NCDEX Aug contract) prices opened the week at Rs 2550/quintal, initially fell sharply on account of lower export demand of soy meal from global livestock industry. However, it could not sustain at lower levels and prices moved slightly higher after making a low of 2462 levels and finally managed to close at 2490 levels on account of short covering, value buying, lower stock of soybean and delayed monsoon in major growing areas also provided support to bulls in the market.
Oil meal exports declined to 1,97,593 metric tonnes in June 2009, down 33% as compared to 2,95,204 metric tonnes in June 2008. While, during the first three months of financial year (April-June, 2009) total oil meal export was 6,14,528 metric tonnes, down 57% on corresponding period last year. India exported 1,09,923 metric tonnes of soy meal, 58, 805 tonnes of rape/mustard seed meal, 12580 tonnes of rice bran meal and 16046 tonnes of castor meal in June 2009.
Plantation of soybean has started during the first week of July in major producing state (Madhya Pradesh). Area covered under kharif oilseeds is 6.63 lakh hectares, down by 65% as compared to 19.23 lakh hectares in corresponding period a year ago, due to delayed monsoon this year. Domestic area under soybean is reported lower at 1.63 lakh hectare compared to 8.11 lakh hectare in the corresponding period a year ago.
USDA’s planted Acreage Report released on Tuesday, which shows soybean acreage number was only 77.43 million acres, about 500,000 acres below trade expectations. However, this was still up from 76.024 million acres on the USDA’s March 31st report, it is largest soybean acreage number on record. In the coming week (NCDEX Aug Soybean), prices are expected to move range bound with a support at 2450/2350 and resistance is seen at 2550/2620 levels.
Black Pepper
Black Pepper prices in the spot markets quoted in the range of Rs.12,500 – Rs.12,900/qtl in the past 15 days. Prices witnessed strength in the beginning due to poor monsoon rains and supportive sentiments that production could reduce in the year 2010 but declined at the end of the previous week. Indonesia fresh crop arrivals have started and they are offering it at lower levels at $2,325 a tonne (f.o.b).
Pepper prices in the international market of Indian origin are being quoted at higher levels of $2,750/tonne. Pepper imports in May showed a substantial increase into the nation. Imports of black pepper were 2,265 tonnes (May) through the Kochi port alone against export of 1,750 tonnes. Demand from the overseas and domestic continues to be lackluster. Prices at the futures after making a high of Rs.13,150/qtl dipped to lows of Rs.12,188/qtl. Prices may dip further if the support level of Rs.12,130 is breached and may touch Rs.12,050/qtl and thereafter Rs.11,600/qtl. Prices may find resistance initially at Rs.12,540/qtl and thereafter at 12,890/qtl.
Rubber
Rubber is witnessing steady to mixed trend in domestic and overseas markets. Buyer resistance is visible which is not allowing prices to go beyond Rs 98-102 range. July Futures in NMCE concluded the weekend session at Rs 96.69 while the August contract traded at Rs 93.47.
In the early part of the week, Rubber exhibited weakness and quantity buyers stayed away from spot markets. Major consumers seemed comfortable with imports rather than buying from domestic markets. The Automotive Tyre Manufacturer’s Association has urged the government bring down the customs duty on natural rubber from 20 to 10% on par with finished rubber products which is levied at 10 %.
Weakness was visible in Asian rubber futures despite the fact that International Tripartite Rubber Council members Thailand, Indonesia and Malaysia announced a decision to remove 9,15,000 tons from the market in 2009 to bolster prices. At TOCOM a steady to high trend was visible in rubber futures while Shanghai technical selling led to decline in prices.
Rubber is likely to witness steady or range-bound trading as there is no bullish factors alive with China buying the only saving grace while US and European markets appear quiet.
Base Metals
It was a rather dull weak for base metals although some recovery was visible during weekend on Chinese data.Copper exhibited weakness on concerns of a weakening US labour market. Payrolls in the U.S., the second-biggest consumer of copper after China, declined by 467,000 in June. The jobless rate climbed to 9.5 percent, the highest since August 1983. This has raised concerns about demand for industrial metals falling.
Copper for three-month delivery slid $65, or 1.3 percent, to $4,970 a metric ton. Analysts expect weaker demand and rising inventories to pull down prices to $4000 in July-September period.
Towards weekend there was a gain from economic data from China which indicated that official purchasing manager’s index for June rose to 53.2 from 53.1 in May, the fourth straight month in which the manufacturing sector has showed signs fo expansion. Nickel prices gained more than 8% to $16,600. The week ahead, expect choppy trade with some profit booking as most of the commodities are trading higher compared to fundamentals.
Last week, MCX August copper prices opened the week at 246.50 initially moved higher and as expected found good resistance at 250.45 levels. Later prices fell sharply lower breaking the initial support marginally made a low of 239.25 and finally ended the week with a loss of Rs.3.8 to close at 241.85. This week market is expected to find good resistance in the range of 243.50-245.50 levels and then strongresistance is seen at 249.50-250.50.
(With analytical inputs from Angel Commodities, Mumbai)
Since Commodity Futures also are part of the financial market, it should be regulated by SEBI, according to the Survey. The Survey hints at removal of commodity transaction tax (CTT) which was vehemently opposed by the industry when the concept was introduced in 2008 budget but not yet notified.
Last week, among the major exchange-related news include MCX launching futures in gasoline. There were also reports that Universal Commodity Exchange has approached the Forward Markets Commission (FMC) to set up India's sixth national level commodity exchange which is promoted by IT entrepreneurs.
Meanwhile, state-run MMTC Ltd, the country’s biggest importer of gold, said it will import 150 tonnes of the yellow metal during the 2009-10 fiscal, the same quantity it imported last fiscal.
Precious Metals
The overall Bullion pack was under pressure last week with Gold continuing to trade sideways whereas Silver witnessed a sharper fall. Weak US economic data and sharp fall in US stock markets made investors rush towards the safe refuge of the US Dollar. Earlier in the week, reports that China has asked to debate proposals for a new global reserve currency at next week’s Group of Eight summit in Italy had supported the Bullion pack. Further, holdings in the world's largest gold-backed exchange-traded fund (SDPR) have been falling in the past few weeks as growing optimism about the global economy saps investors' appetite for the safe-haven asset. Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged at 1,120.55 metric tons.
Spot Gold continues to trade in the range of $912 - $948 zone. Overall, gold has benefitted from persisting worries that heavy government borrowing could boost inflation. Physical demand from India has been weak with imports down 50% year-on-year in the first half of this year compared with the first six months of 2008, as per the Bombay Bullion Association. For the week, we expect Spot Gold prices to have immediate support at $920/$908 whereas resistance is seen at $944/$958. Spot Silver prices shall find support at $13.00/$12.70 whereas resistance is seen at $13.65/$13.95. MCX August Gold has support at 14350/14260 whereas resistance is seen at 14580/14710. MCX Sep Silver shall find support at 21220/20750 whereas resistance is seen at 21950/22410 levels.
Crude Oil
Crude Oil prices pared early gains and tumbled in the last week, reaching to their lowest level in one month and marking its third successive weekly loss, as bearish weekly inventory data and relatively strong dollar against major currencies exerted pressure on oil prices. Oil prices are also taking cues from equity markets and weak global equity markets dented risk sentiments in the market and weighed on oil prices. NYMEX May Crude Oil futures ended the week 5.10% lower than the previous week to close at $65.63 per barrel, the lowest closing level since 3rd June.
Crude Oil prices are facing downward pressure once prices reach above $70 mark, as recent economic data is still mixed and raising concerns in the mind of investors with regard to early economic recovery. With unemployment rates are at multi year high, consumers are unlikely to expedite consumption in the near term, which can certainly curb the energy demand. Global risk sentiment is on the edge and if equity markets peak off, then we can see fall in risk appetite, which can potentially reduce demand for higher yielding assets like commodities.
Weekly inventory data in US is showing that energy demand in world’s largest oil consuming nation is still more than 5% less than last year. Despite US summer driving season is underway, gasoline demand is not picking up, which is certainly not a positive sign. Traders will also have to look out for trend in dollar, as rising dollar can also weigh on oil prices. Rising geopolitical tension in the Nigeria is the only possible factor which can lend support to oil prices. Due to above mentioned factors; we expect that oil prices can face resistance near $70 levels and it can eventually head downwards towards $60-61 levels.
Soybean
Soybean (NCDEX Aug contract) prices opened the week at Rs 2550/quintal, initially fell sharply on account of lower export demand of soy meal from global livestock industry. However, it could not sustain at lower levels and prices moved slightly higher after making a low of 2462 levels and finally managed to close at 2490 levels on account of short covering, value buying, lower stock of soybean and delayed monsoon in major growing areas also provided support to bulls in the market.
Oil meal exports declined to 1,97,593 metric tonnes in June 2009, down 33% as compared to 2,95,204 metric tonnes in June 2008. While, during the first three months of financial year (April-June, 2009) total oil meal export was 6,14,528 metric tonnes, down 57% on corresponding period last year. India exported 1,09,923 metric tonnes of soy meal, 58, 805 tonnes of rape/mustard seed meal, 12580 tonnes of rice bran meal and 16046 tonnes of castor meal in June 2009.
Plantation of soybean has started during the first week of July in major producing state (Madhya Pradesh). Area covered under kharif oilseeds is 6.63 lakh hectares, down by 65% as compared to 19.23 lakh hectares in corresponding period a year ago, due to delayed monsoon this year. Domestic area under soybean is reported lower at 1.63 lakh hectare compared to 8.11 lakh hectare in the corresponding period a year ago.
USDA’s planted Acreage Report released on Tuesday, which shows soybean acreage number was only 77.43 million acres, about 500,000 acres below trade expectations. However, this was still up from 76.024 million acres on the USDA’s March 31st report, it is largest soybean acreage number on record. In the coming week (NCDEX Aug Soybean), prices are expected to move range bound with a support at 2450/2350 and resistance is seen at 2550/2620 levels.
Black Pepper
Black Pepper prices in the spot markets quoted in the range of Rs.12,500 – Rs.12,900/qtl in the past 15 days. Prices witnessed strength in the beginning due to poor monsoon rains and supportive sentiments that production could reduce in the year 2010 but declined at the end of the previous week. Indonesia fresh crop arrivals have started and they are offering it at lower levels at $2,325 a tonne (f.o.b).
Pepper prices in the international market of Indian origin are being quoted at higher levels of $2,750/tonne. Pepper imports in May showed a substantial increase into the nation. Imports of black pepper were 2,265 tonnes (May) through the Kochi port alone against export of 1,750 tonnes. Demand from the overseas and domestic continues to be lackluster. Prices at the futures after making a high of Rs.13,150/qtl dipped to lows of Rs.12,188/qtl. Prices may dip further if the support level of Rs.12,130 is breached and may touch Rs.12,050/qtl and thereafter Rs.11,600/qtl. Prices may find resistance initially at Rs.12,540/qtl and thereafter at 12,890/qtl.
Rubber
Rubber is witnessing steady to mixed trend in domestic and overseas markets. Buyer resistance is visible which is not allowing prices to go beyond Rs 98-102 range. July Futures in NMCE concluded the weekend session at Rs 96.69 while the August contract traded at Rs 93.47.
In the early part of the week, Rubber exhibited weakness and quantity buyers stayed away from spot markets. Major consumers seemed comfortable with imports rather than buying from domestic markets. The Automotive Tyre Manufacturer’s Association has urged the government bring down the customs duty on natural rubber from 20 to 10% on par with finished rubber products which is levied at 10 %.
Weakness was visible in Asian rubber futures despite the fact that International Tripartite Rubber Council members Thailand, Indonesia and Malaysia announced a decision to remove 9,15,000 tons from the market in 2009 to bolster prices. At TOCOM a steady to high trend was visible in rubber futures while Shanghai technical selling led to decline in prices.
Rubber is likely to witness steady or range-bound trading as there is no bullish factors alive with China buying the only saving grace while US and European markets appear quiet.
Base Metals
It was a rather dull weak for base metals although some recovery was visible during weekend on Chinese data.Copper exhibited weakness on concerns of a weakening US labour market. Payrolls in the U.S., the second-biggest consumer of copper after China, declined by 467,000 in June. The jobless rate climbed to 9.5 percent, the highest since August 1983. This has raised concerns about demand for industrial metals falling.
Copper for three-month delivery slid $65, or 1.3 percent, to $4,970 a metric ton. Analysts expect weaker demand and rising inventories to pull down prices to $4000 in July-September period.
Towards weekend there was a gain from economic data from China which indicated that official purchasing manager’s index for June rose to 53.2 from 53.1 in May, the fourth straight month in which the manufacturing sector has showed signs fo expansion. Nickel prices gained more than 8% to $16,600. The week ahead, expect choppy trade with some profit booking as most of the commodities are trading higher compared to fundamentals.
Last week, MCX August copper prices opened the week at 246.50 initially moved higher and as expected found good resistance at 250.45 levels. Later prices fell sharply lower breaking the initial support marginally made a low of 239.25 and finally ended the week with a loss of Rs.3.8 to close at 241.85. This week market is expected to find good resistance in the range of 243.50-245.50 levels and then strongresistance is seen at 249.50-250.50.
(With analytical inputs from Angel Commodities, Mumbai)
Sunday, 12 April 2009
Look for Gold/Oil ratio before investing in gold
Crude oil prices have come downt o $120 per barrel levels while Gold has sunk below $900 levels, however, the Gold/Oil ratio is at all time lows which means that gold is now undervalued, according to Quantum Gold Fund.
Gold / Oil ratio refers to how much crude oil can be bought with one ounce of Gold. With gold at $863 per ounce and oil at $117 per barrel, the Gold/Oil ratio is at 7.31. The average for the last 40 years has been around 15.
“But does this mean gold prices are too low, or perhaps that crude oil prices are unsustainable at current levels and have to come down sharply and quickly. Your viewpoint depends on which side of the fence you are sitting on,” Quantum Fund said in a communiqué to investors.
If one were to take a pragmatic view, it seems likely that the future scenario could be something in between the two viewpoints. Given the number of factors influencing crude prices one can’t be really sure of the trend of crude oil prices in the future.
However one can be reasonably sure that the long term relationship of Gold to Crude oil will revert back to its historical average of around 1: 14.5 versus 1: 7.4 currently. This can happen either by a big fall in crude oil prices or gold prices moving up much higher.
Short term price movements of gold cannot be easily predicted, however, analysts and traders are bullish on on gold for medium term and predicted it could go to S2000 per ounce.
Crude oil is expected to slide below $ 100 per barrel mark, if some analysts predictions come true.
If Crude Oil prices fall further what will happen to gold prices? Crude Oil prices and gold prices move in tandem, if crude falls gold also comes tumbling down. Therefore a correction in Crude Oil prices led to a correction in Gold prices.
International crude oil prices increased by more than 47% this year when it reached its all time high of around $145 whereas international gold prices went up by only 14% during the same time frame. This shows that record crude oil prices were not followed by record gold prices.
“We believe that the gold / oil ratio will align with the long term average i.e 14.5. Even if crude oil prices correct to $100 levels which experts say could be the new floor price, then gold has to rise to $1450 to get back to its historical average. There are various forecasts of crude boiling to $150 levels and above. In such ascenario, to adjust to the historical average, gold prices will have to rise above $2100,” Quantum Gold Fund said
Gold / Oil ratio refers to how much crude oil can be bought with one ounce of Gold. With gold at $863 per ounce and oil at $117 per barrel, the Gold/Oil ratio is at 7.31. The average for the last 40 years has been around 15.
“But does this mean gold prices are too low, or perhaps that crude oil prices are unsustainable at current levels and have to come down sharply and quickly. Your viewpoint depends on which side of the fence you are sitting on,” Quantum Fund said in a communiqué to investors.
If one were to take a pragmatic view, it seems likely that the future scenario could be something in between the two viewpoints. Given the number of factors influencing crude prices one can’t be really sure of the trend of crude oil prices in the future.
However one can be reasonably sure that the long term relationship of Gold to Crude oil will revert back to its historical average of around 1: 14.5 versus 1: 7.4 currently. This can happen either by a big fall in crude oil prices or gold prices moving up much higher.
Short term price movements of gold cannot be easily predicted, however, analysts and traders are bullish on on gold for medium term and predicted it could go to S2000 per ounce.
Crude oil is expected to slide below $ 100 per barrel mark, if some analysts predictions come true.
If Crude Oil prices fall further what will happen to gold prices? Crude Oil prices and gold prices move in tandem, if crude falls gold also comes tumbling down. Therefore a correction in Crude Oil prices led to a correction in Gold prices.
International crude oil prices increased by more than 47% this year when it reached its all time high of around $145 whereas international gold prices went up by only 14% during the same time frame. This shows that record crude oil prices were not followed by record gold prices.
“We believe that the gold / oil ratio will align with the long term average i.e 14.5. Even if crude oil prices correct to $100 levels which experts say could be the new floor price, then gold has to rise to $1450 to get back to its historical average. There are various forecasts of crude boiling to $150 levels and above. In such ascenario, to adjust to the historical average, gold prices will have to rise above $2100,” Quantum Gold Fund said
Commodity Trends: India's Futures go rural
India’s inflation fell to near zero levels although it may take some time for it to get reflected in the prices of essential commodities. Even as the BSE Sensex is moving in a narrow range unable to break the 9000 mark, India’s largest commodity bourse created a record by as its turnover touched Rs 32016 crore on a single day the previous highest being Rs 29,887 crore in September 18, 2008. Angel Commodities, one of the leading commodity brokerages also announced the crossing of a major milestone of Rs 1000 crore turnover. What ever gains in BSE in recent days has been attributed to growth in commodity stocks.
Commodity market regulator, Forward Markets Commission (FMC) will install at least 180 display boards at locations such as rural post offices, Krishi Vigyan Kendras and APMCs across the country in the next 10 days to provide prices of farm com modity futures to farmers. Meanwhile gold and crude oil continue to generate more volumes in India’s commodity bourses.
Precious Metals
Gold prices recovered strongly from its lows during last week and almost touched a high of $970/oz., as the Federal Reserve's plans to purchase as much as $1.15 trillion in U.S. bonds and mortgage-backed securities sparked worries of inflation ahead, raising gold's appeal as a hedge against rising prices. This is the most aggressive plan taken by Fed since the early 1960. Demand from gold ETF also increased during this week. Holdings in SPDR Gold Trust, world’s largest gold ETF, touched an all time high of 1103.29 tons.
The volatility in prices in the Bullion pack has increased greatly over the past few months with 19 March being a highly volatile trading day. Spot Gold is finding excellent support in the zone of $880-$890 levels which is viewed as value buying zone by investors. Whereas major resistance zone is seen between $960-$970. The demand for the safe-haven asset is still prevalent with the USD weakening consistently over the past few trading sessions. Also, the increased volatility in the Rupee is playing its role in determining domestic bullion prices. In coming weeks & months, the state of the overall global economic scenario will play a key role in determining bullion prices as investors evaluate various asset classes to channel their funds. Still gold remains the best bet under current market scenario. MCX April Gold can face resistance around Rs.15600 levels, whereas support is seen at Rs. 14850 per 10 gram.
Crude Oil
crude Oil prices traded higher amidst high amount of volatility in the last week. Oil prices surged to a three month high on account of weak dollar and rally in global equity markets. Despite bearish inventory data, prices rebounded from its lows, after US Federal Reserve decided to buy Treasury bonds worth $300bn to ease credit market. Steps taken by Fed rekindled hopes for economic recovery and rise in energy demand. Crude Oil prices have increased by more than 20% this year, on account of strict implementation of production cuts by OPEC to reduce excess supply and weak dollar against major currencies. Volatility in oil prices has increased sharply in past few trading sessions. We expect that oil prices can witness fierce tussle between bulls and bears in coming weeks. Factors like falling demand and weak economic data are favoring bears, but weak dollar, rise in risk appetite amidst strong equity markets are giving bulls a reason to come back in to market. After last week’s rally, oil prices can witness profit booking. During this week, NYMEX May Crude Oil prices are expected to trade in the range of $42.50 and $53.50. MCX April Crude Oil futures have support at Rs. 2390/2175 and resistance is seen at Rs. 2740/2870 per barrel.
Rubber
Rubber prices in domestic and global markets were on a recovery mode this week. In the weekend covering groups lifted the prices to further highs driven by possibly a speculative interest. However, 2009 as predicted by many analysts is not going to be a good year for rubber with consumption to fall 5.5 percent across the globe mainly due to falling automobile sales. Rubber prices have slumped 50 percent in a year as the global recession slashed tire demand. Europe’s car market shrank 7.8 percent in 2008, while U.S. sales contracted 18 percent to a 16-year low
In TOCOM and Shanghai, benchmark natural rubber futures climbed to the highest in more than two weeks as producers restated proposed output cuts and on speculation China, the world’s largest consumer, is adding the commodity to state stockpiles.
Spot rubber flared up on Friday. Sheet rubber RSS 4 moved up to Rs 76.50 from Rs.75.50 a kg, while the market made all-round improvement even in the absence of enquires from the major manufacturers. The volumes were comparatively better.
The April futures for RSS 4 firmed up to Rs 77.99 (Rs 77.50), May to Rs 79 (Rs 78.56), June to Rs 79.99 (Rs 79.67) and July to Rs 79.95 (Rs 79.80) a kg on National Multi Commodity Exchange (NMCE).
Towards weekend in global markets, RSS 3 slipped further to Rs 73.37 (Rs 73.81) a kg on Singapore Commodity Exchange. The grade’s spot weakened to Rs 73.68 (Rs 74.43) a kg at Bangkok. The physical rubber rates were: RSS-4: 76.50 (75.50), RSS-5: 75 (74), Ungraded: 73.50 (73), ISNR 20: 74 (73.50), and Latex 60%: 57.50 (57).
Meanwhile, India’s Rubber Board has raised alarm against the rapid growth in tyre imports mainly from China. A steady trend with an slight upward bias could be expected for rubber next week.
Base metals
Base metal prices are moving higher on the back of a weaker dollar and stable equities as both these factors have improved market sentiments. A weaker dollar makes base metals look attractive for holders of other currencies. This is providing a strong support to base metal prices but the upside could be capped as LME inventories have touched a 15-year high. The base metals market is in an oversupply situation and fundamentals look bearish. However, the current rise in base metal prices is mainly due to technical buying and short-covering. In the coming week, base metal prices are expected to remain volatile as the US is expected to announce economic data like existing home sales, new home sales, 4Q GDP, personal income and spending.
Soybean
Refined soy oil futures fell sharply during the last week as government of India scrapped import duty on soy oil to reduce premium over palm oil. Government of India extended ban on exports of edible oil. Last year, Govt. of India had banned export soy oil in March to control rise in price. According to the Solvent Extractor’s Association of India, India‘s import of edible oil increased to 7,30,094 metric tonnes in February, 2009, up 69.40% as compared to last year during the same period. Edible oil imports in the first four months of oil marketing year (November to February) was 28,24,941 metric tonnes, up 87% as compared to 15,12,695 metric tonnes during the same period last year. PEC Ltd. has floated two separate tenders for the local sales of 3161 metric tonnes of crude soy oil. PEC is authorized by the government of India to import edible oils and sales the local market. Global vegetable oil prices may still fall due to ample global supply. In the coming week, prices are expected to move lower on account of higher import of edible oil and scrapped import duty on soybean oil. NCDEX April Refined Soy Oil has support at 430/422 and resistance is seen at 452/460 levels in this week.
Other Edible Oil
India’s edible oil and oilseeds Futures recovered from their lower level tracking the global markets. The Bursa Malaysia Derivative making decent gains in the past few days and CBOT’s projection aided market sentiments. It was a firm trend in crude palm oil that lend support to the oil seeds complex. The June Contract closed at 1985 a gain of 74. Nymex Crude Oil has support at US $51 per barrel.
Mustard Seed and castor seed tracked the gains in soybean and ended on a mixed to higher note in physical, Futures markets
Turmeric
Spot prices at Erode and Nizamabad over the past couple of days are being quoted at higher rates due to better offtakes at the domestic market. Prices in the previous week were quoted in the range of Rs. 4,200-4,350/qtl. Even though the arrivals are more offtakes are equally better due to domestic buying. Arrivals on an average in the previous week were around 25,000 bags daily in both the major mandis of Nizamabad and Erode. Fear of lower availability of Turmeric in 2009 is supporting the prices to strengthen. Demand from the domestic market especially from local stockists is present but the overseas demand has reduced as the prices are at higher levels. Farmers are hoarding the stocks and not bringing in fresh turmeric to the market in good quantity in order to reap maximum profits. Turmeric Futures April 09 contract touched a high of Rs.5,090/qtl tracking spot prices. Prices are ruling at higher levels thus cautious trading is advisable at futures. Prices have initial support at Rs.4,840/qtl and thereafter at Rs.4,700/qtl. Resistance could be seen at Rs.5,205/qtl and thereafter at Rs. 5,395/qtl.
Sugar
Sugar market declined sharply by 15% in the last 3-4 weeks as the Indian government has adopted various measures to curb spiraling Sugar prices. Besides imposition of stock limits and duty free impost of Raw Sugar, Government is now considering a proposal to let state-run trading companies import refined sugar at zero duty to bridge the widening gap between demand and supply. Final decision by the cabinet regarding the duty free imports of refined Sugar is expected in the coming week. India will have to import 3 million tonnes of Sugar to meet its domestic consumption of 22.5-23 million tonne. But imported sugar is much more expensive than local sweeteners at present, making the imports unviable. Thus, despite government’s effort to ease import norms, we don’t expect imports to take place in the coming months. Any significant decline in the prices should be treated as a good buying opportunity as Overall, fundamentals remain supportive for the prices with lower output forecast in India and a global deficit of more than 4.3 million tonnes. April Sugar futures are currently trading at around Rs. 2035 levels. Prices are having initial support at Rs. 1995 and then 1953. Resistance could be seen at Rs. 2080/qtl and thereafter Rs. 2120/qtl.
Black Pepper
The undertone in the Black Pepper spot and futures counter this week was steady due to increased buying interest and aided by a tight supply position. Indian parity in the international market was at $2,225-2,325 a tonne (c&f) as the rupee has strengthened against the dollar on Wednesday. Overseas reports on Wednesday said that Brazil was firmer and exporters appeared to reluctant to offer. B Asta was said to have been offered at $2,000 a tonne while B1 at $1,900 a tonne (fob).
Vietnam was reportedly steady at $1,800 a tonne for faq 500 GL. More buying interest was seen for black and white pepper from industry albeit for nearby deliveries. Lasta was being offered on replacement basis at $2,200-2,250 a tonne (fob). New Indonesian crop is said to be lower at 15,000 tonne against an estimated 30,000 tonnes last season. However, some substantial quantity of carry over stock is reportedly available therein the hands of middlemen and exporters.
In the weekend the physical counter traded steady amidst good underlying buying interest. The domestic as well as the overseas buyers from Europe were active. The stock availability remained low inducing the Indian traders to purchase from other cheaper origin like Indonesia at $2100/tonne fob. At the benchmark Kochi markets berries were offered at Rs.10300/qtl for the ungarbled variety and 10800/qtl for the garbled variety, steady as that of prior trading session. Around 33.5 tonnes were sold for the arrivals of 25 tonnes. Strengthening rupee against dollar pushed up Indian parity to $2300/tonne f.o.b while VASTA was offered at $2150/tonne and BASTA at $1950/tonne f.o.b. Pepper is likely to trade weak during early hours with the possibility of late recovery.
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