Trade with Commodities

Monday, June 1, 2009

Oil sees biggest monthly gain in a decade

Crude Price Touches 7-Month High Of $68 As Equities Rally Across The Globe On Hopes Of Economic Recovery

CRUDE oil prices rose more than 2% to a seven-month high on Monday, extending its biggest monthly gain in a decade due to rallying stock markets and sustained expectations for a global economic recovery.
    US stocks rose, following gains in Europe and Asia driven by data showing China's manufacturing continued to expand moderately in May. The dollar weakened, boosting investor demand for oil and commodities.
    "It's the dollar and equities," said Christopher Bellew, a broker at Bache Commodities. "It's maybe not so surprising if there is a chance of seeing some economic recovery and increased demand for oil."
    US crude was $1.44 higher at $67.75 by 20:00 pm locally having climbed as high as $68.29. Brent crude rose $1.60 to $67.12 a barrel. The market is still down sharply from a record high over $147 reached last year.
    China's manufacturing sector continued to expand moderately in May as new export orders improved, two surveys showed on Monday, adding to tentative signs the world's third-largest economy was stabilising.
    Oil rallied by 30% in May to its highest since early last November, giving Opec enough hope about the outlook that it agreed to maintain production at last week's meeting.
    At the same time, the group is unlikely to move quickly to curtail the rally. At the weekend Saudi Oil Minister Ali al-Naimi said Opec would wait until crude inventories fall to around 53 days of forward cover before considering raising output, nearly 10 days below current levels. Despite oil's rally, many analysts have said the underlying fundamentals remain bearish. This is now starting to change, with US crude stocks falling last week and gasoline inventories dropping for the fifth week.
    Reflecting increased expectations that prices will rise, speculators have expanded their net length in Nymex crude contracts to over 40,000 lots, the highest since February.
    Oil as well as base metals investors are now factoring in economic revival and probably a fairly decent 'V'," said Commonwealth Bank of Australia commodity strategist David Moore.

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Monsoon’s return washes away fears of spurt in food prices

Sowing Of Kharif Crops In June Dependent On Generous Showers

WITH the monsoons reviving after a lull, fears of another spike in food inflation have been dispelled for now. Monsoons have advanced over the southern states of Karnataka and Andhra Pradesh after a week's break, the India Meteorological Department said on Monday.
    Agri commodity analysts pointed out that any further delay in revival in rain would have led to a spike in the prices of kharif crops. "Further delay hereafter (in advancement of monsoon) would have affected land preparation and sowing activities. In such events, the prices of kharif crops would have moved higher," said Karvy Comtrade Ltd chief analyst Harish Galipelli.
    Monsoon showers are key to the cultivation of kharif crops, which account for nearly 60% of the annual agricultural output. Sowing of the kharif crops is to start in the second week of June. A good kharif harvest is essential to keep the rural demand robust, which has largely been the reason why the Indian economy has been able to withstand the global economic turmoil better than other countries.
    But all that good work will go in vain if the rains are further delayed. After touching a ten-year high of 11.64% in early January, annual inflation for food price has eased to 8%, as per the latest figures. Consumer price inflation has dropped from double digit figures early this year to around 8.5% in April.
    Besides keeping the kharif production robust, timely monsoons are also expected to help in the cultivation winter crops such as corn, lentils and soybeans, which are planted after the onset of the rains.
    Sharekhan commodity research analyst Mehul Agrawal pointed out that with normal monsoons in the offing, one can expect the prices of agri-commodities to remain low without hurting the profits of farmers. "Farmers' revenue would not be hurt as lower price could be well cushioned by higher output to nullify the fall in price. Cyclical factors in terms of demand, supply and demand destruction at higher price will play their own role," Mr Agarwal added.