Commodities

Commodity witch-hunt searches for wrong demons

4 Aug 2009

It s enough to excite any conspiracy theorist: commodity prices are up while the economy is still down. The UK s FSA is the latest to investigate. But new rules on transparency won t alleviate market volatility. The only durable cure is to stop relying so much on spot prices.

BHP’s new chairman may need new style

4 Aug 2009

Jac Nasser would be an obvious choice to supervise a company in trouble. Ford s former boss likes to shake things up. But at BHP, he may need to be emollient. Happy investors don t need drama, while governments concerned about commodity prices will test his diplomatic skills.

Xstrata puts little extra pressure on Anglo

4 Aug 2009

The Swiss miner is using its decent H1 results to reassert its credentials as a merger partner for Anglo American. Cost discipline and safety improvements suggest that anything Anglo can do, Xstrata can do better. But Xstrata will still need to pay a premium if it wants a deal.

Commodity price surge could endanger world economy

3 Aug 2009

Commodity price spikes generally occur at the peak of economic cycles. This time, a sharp rebound coincides with an economic trough. Whether caused by monetary factors or Asian demand growth, a further commodity price advance could spark inflation and stall global recovery.

Shell keeps dividend, cuts investment

30 Jul 2009

The energy major s new boss faces an old problem the sums don t work for many key projects with oil around $60, and falling natural gas prices make it harder. Voser s response is to axe jobs, cut capex and increase debt, but maintain the dividend. That may not be sustainable.

Exxon Q2 stumble highlights long-term challenges

30 Jul 2009

The West s top company missed expectations. The halving of oil doesn t fully account for a 66% decline in profit. Decreasing production and sustained capital spending do. They also point to Exxon s conundrum: oil is getting harder to find and costlier to extract.

Savings drive record emerging market bond volume

28 Jul 2009

Firsthalf issuance was the most ever, belying forecasts earlier this year of widespread capital shortages. Chinese and corporate issuers dominated. Companies in countries with big savings pools did the most business showing the advantages of thrift.

Chinese settlement won’t end iron ore spat

8 Jul 2009

The resourcehungry nation might be ready to agree the same 33% cut in contract prices agreed elsewhere in Asia. But miners shouldn t expect China to stop fighting for lower prices. Price volatility is as old as the benchmark pricing system. China s determination is new.

US efforts to vilify energy traders might backfire

7 Jul 2009

The new head of America s commodity markets regulator plans to hold hearings on whether the agency should limit the activities of traders to curb excessive speculation . But any rules born of such a simplistic view are likely to be harmful.

China pushes envelope for oil

3 Jul 2009

First Iraq, now Argentina. Chinese energy groups are hunting for oil in risky places. That s good for countries with resources to sell. But it s unwelcome competition for the oil majors. At least in Argentina, a deal for Repsol s assets could make sense for all sides.

Rogue trader exposes fickle oil market

3 Jul 2009

How can a small trader drive up the price of a barrel of crude by $2.50 in under an hour? By putting a big bet on oil futures in the early morning. The market proved easy to move. At least traders PMV didn't lose much in unwinding the trade.

Argentine anti-market policies’ good run may end

30 Jun 2009

President Fernández' moderate defeat in midterm elections may force policy compromise. So may reality with wheat planting down 30%, her government s strategy of heavily taxing farmers and exporters may finally hit the economic buffers. Still, Argentina has had a great run.

Oil surge is mixed blessing for Russian economy

18 Jun 2009

At $70 a barrel, oil prices are back where Russia says it can balance its accounts. But the Russian economy is still in a severe slump, worsened by longstanding flaws including corruption. The danger is that with oil on the rise, reforms might look less urgent.

Gold vending machines are sign of the times

17 Jun 2009

The idea of buying gold from machines at airports seems odd. After all, if the worst happened, why would anyone want to take it with them? But the buzz around the yellow metal makes sense. With both deflation and inflation causing concern, its perceived attributes seem alluring.

Iraqi oil could be China’s consolation prize

15 Jun 2009

Sinopec's mooted £5bn bid for oil producer Addax would give the Chinese petro giant access to Kurdistan and Nigeria, where Western majors tread with caution. It s China s payoff for political isolationism but no substitute for the bigger deals that got away.

Oil, bonds highlight risk of imperfect recovery

10 Jun 2009

Huge deficits and zero rates are keeping depression and deflation away. But the oil price has been swept up by the rising liquidity tide and bond yields have risen in a fearful response to free money. The two together could make for a more painful recovery than the market hopes.

China throws petrol on speculative fire

2 Jun 2009

A 7% raise in official petrol prices is a nod towards market forces. Beijing is clearly worried about cushioning the fragile consumer. The problem is that its petrol price controls can encourage speculation.

Waning supply helps underpin oil price rise

13 May 2009

Oil prices have rocketed about 70% in three months. With demand still declining, that owes much to a revival of investor spirits. But there's something else: supply capacity, especially from Opec, is shrinking. With demand recovery in mind, that's a reason to bid up the price.

BP and Shell can cope with $50 oil

28 Apr 2009

Neither company is comfortable with the current price. They think at least $60 a barrel is needed to keep up investments and maintain their dividends. But both can borrow more. BP looks like the safer shortterm bet. It is growing faster and spending less than Shell.

Chinese gold rush would benefit China least

27 Apr 2009

Changing US Treasuries into gold would help Beijing undermine the dollar s dominance. But years of mercantilism can t be unwound painlessly. Big Chinese buying would drive the yellow metal s price sky high. The biggest beneficiary of a gold rally? Step forward, Uncle Sam.