Commodity Research Commodities Daily Investors undecided, prices defending their gains Energy: As the new week of trading gets underway, Brent is holding its own above the $12 per barrel mark and is therefore defending its gains from Friday. The Chinese prime minister has announced plans for economic stimulus measures, which is lending support to the price. What is more, Iran has stated that it will be scaling up its military presence in the Strait of Hormuz, through which 2% of seaborne crude oil is transported. Despite an oil pipeline having been put into operation in the United Arab Emirates, a blockade would still cut large parts of the oil production in the Gulf states off from the world market, which justifies a risk premium on the oil price. Market positioning data published by the CFTC for the week to 1 July showed that speculative net long positions in WTI had decreased by 6.2 thousand to 17,72 contracts. This puts them at a comparatively low level, which suggests that a bottom could be formed, followed by a price recovery. The corresponding figures for Brent are due to be published this lunchtime. In the case of US natural gas, there are now net long positions of 57.9 thousand contracts in the futures plus swaps category in mid-april there were still net short positions totalling nearly 7 thousand contracts. The increase in the price of US natural gas in recent months is thus attributable to a major extent to a shift in sentiment among money managers. In view of the almost record-high net long positions, we believe the upside potential of natural gas to be virtually exhausted. Precious metals: Gold is defying the firm US dollar at the start of the week and is defending the gains it achieved late last week. As the new week of trading gets underway, the yellow metal is trading at around $1,59 per troy ounce. In euro terms, gold has been riding for a time above the 1,3 per troy ounce mark, its highest level in more than five weeks. In India, formerly the world s largest gold consumer, the wholesale price inflation in June decreased further to 7.3%. This gives the Indian central bank scope to lower interest rates further at its next meeting at the end of the month, which would have a positive impact on gold. That said, the World Gold Council (WGC) assumes that Indian gold demand this year will be down for the second year in a row. According to the WGC, Indians are generally cutting their spending and preserving their liquidity in view of the economic cooldown and the uncertain prospects for the future. What is more, there is less money available for buying gold as a result of a poorer than expected monsoon season. So far, weaker gold demand in India has been offset by high rates of gold buying in China. In the week to 1 July, speculative financial investors reduced their net long positions in gold by 15.9 thousand to 8.3 thousand contracts, thereby more or less completely negating the previous week s increase again. CHART OF THE DAY: Financial investors facilitate increase in natural gas price 8 ' contracts 6 16 July 212 Speculative market positioning (net) 1-Jul contracts Weekly change WTI 17.72-6.178 Henry Hub 57.918 6.755 Gasoline 52.796.855 Gold 8.287-15.932 Silver 5.343 -.799 Platinum 11.265 -.348 Palladium 3.34 -.18 Copper -4.814-3.6 Wheat 54.831 8.1 Corn 192.528 27.318 Soybeans 229.83 2.869 Cotton.264-1.1 Coffee -5.721 5.37 Cocoa 7.787 4.421 Sugar 17.566 42.759 Source: CFTC, Bloomberg Head of Commodity Research Eugen Weinberg +49 69 136 43417 eugen.weinberg@commerzbank.com Carsten Fritsch +49 69 136 216 carsten.fritsch@commerzbank.com 4-4 -8 5 4 3 Barbara Lambrecht +49 69 136 22295 barbara.lambrecht@commerzbank.com Michaela Kuhl +49 69 136 29363 michaela.kuhl@commerzbank.com -12 2-16 1 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Net short positions managed money (futures and swaps), ls Henry Hub (US$/mmBtu), rs Daniel Briesemann +49 69 136 29158 daniel.briesemann@commerzbank.com Source: CFTC, Bloomberg, Commerzbank Corporates & Markets research.commerzbank.com Bloomberg: CBIR For important disclosure information please see last page
Base metals: As trading resumes this morning, metal prices are defending their gains from the end of last week despite weak Chinese equity markets and a firm US dollar. Citing prime minister Wen Jiabao, state Chinese news agency Xinhua reports that the efforts to stabilize the economy are working and that the government plans in the second half of the year to step up its efforts to increase policy effectiveness and foresight. In a pilot project, the central government is making CNY 32 billion (equivalent to a good $5 billion) available to four million impoverished households to enable them to renovate their decrepit houses. Although it may not be officially designated as such, this can certainly be regarded as an economic stimulus programme. Further programmes of this kind are likely to follow, thus keeping demand for metals at a high level. As anticipated, speculative financial investors again expanded their net short positions in copper in the week to 1 July, increasing them by 3.1 thousand to 4.8 thousand contracts. In effect, this reverses part of the short covering from the previous week; at the same time, the increase was majorly responsible for the good 4% decrease in the price of copper in the period under review. That said, the data series has shown itself to be highly volatile in recent weeks, and the rise in the copper price after the reporting date would suggest that net short positions have meanwhile been reduced again. Agriculturals: In view of the risks to supply, speculative financial investors are pinning their hopes on rising prices. The CFTC s data show that speculative net long positions in wheat and corn were significantly expanded again in the week to 1 July. Net long positions in corn were increased four-fold to 192.5 thousand contracts within four weeks. In wheat they climbed to nearly 55 thousand contracts, their highest level since March 28. Less than two months ago we saw just as many net short positions which at the time represented the highest level since mid-june 21, before the wheat price exploded on the back of the Russian export ban. Unlike two years ago, the shockwave which is currently hitting the grain markets originated on the corn market. Despite the expected production shortfalls, there is no export ban in sight in the Black Sea region. The market for raw sugar also shows a strong increase in net long positions, which climbed by over 4 thousand contracts to 17.6 thousand contracts, the highest figure since April. In the case of sugar, heavy rainfall in Brazil is currently weighing on sentiment as it is hampering harvesting and thus delaying exports. The coffee crop is also being negatively affected by this here, speculative net short positions in the reporting week were halved to 5.7 thousand contracts as compared to the previous week. Prices Energy 1) current 1 day 1 week 1 month 212 Brent Blend 12.4 1.3% 1.8% 4.7% -5% WTI 87.1 1.2%.8% 3.1% -12% Gasoline 988. 2.9% -.8% 6.1% 6% Gasoil 879.8 1.6% 1.3% 3.3% -5% Diesel 91. 1.8%.9% 4.4% -3% Jet fuel 946. 1.7% 2.4% 4.1% -4% Natural gas 2.87.% -.5% 16.3% -4% Base metals 2) Aluminum 191 1.5% -1.% -1.4% -6% Copper 77 1.9% 1.5% 2.2% 1% Lead 188 1.3%.% -2.4% -8% Nickel 16155 2.4% -1.8% -4.4% -14% Tin 1878 1.5% -.6% -5.1% -3% Zinc 1874 1.7%.6% -2.% 1% Steel 45.% 4.2% 2.4% -2% Precious metals 3) Gold 1589.7 1.1% -.1% -2.5% 1% Gold (EUR) 1297.8.8%.6%.% 8% Silver 27.3.6% -.6% -5.2% -2% Platinum 143.5.9% -1.2% -3.9% 2% Palladium 585. 1.1% -.3% -7.1% -11% Agriculturals 1) Wheat MATIF 258.3 1.8% 6.2% 25.8% 28% Wheat CBOT 847.8.1% 5.2% 42.9% 33% Corn 74.5 1.3% 5.2% 32.9% 19% Soybeans 1594.8 1.4% 1.4% 18.4% 36% Cotton 71.8 -.3% 1.7% -1.5% -22% Sugar 22.73 -.4% -.3% 8.6% -3% Coffee Arabica 186.1.1% 2.2% 24.2% -18% Cocoa 2216.1% -4.3%.% 5% Currencies 3) EUR/USD 1.2249.4% -.7% -2.8% -6% Inventories Energy * current 1 day 1 week 1 month 1 year Crude oil 3782 - -1.2% -1.7% 6% Gasoline 27725-1.3% 2.1% -2% Distillates 12912-2.6%.7% -17% Crude oil Cushing 46782 - -1.8% -2.1% 24% Natural gas 3135-1.1% 9.% 2% Gasoil (ARA) 233 - -2.2% -1.1% -13% Gasoline (ARA) 722-22.8% -.3% 3% Base metals ** Aluminum LME 479985 -.1% -.6% -1.% 9% Shanghai 34713 - -.5% -4.9% 41% Copper LME 251625.% -.7%.9% -46% COMEX 49893 -.9% -3.8% -12.7% -38% Shanghai 16928-3.7% 21.5% 47% Lead LME 342975 -.5% -1.3% -.5% 11% Nickel LME 1713 1.3% 2.% 3.4% 4% Tin LME 1295.% -3.9% -.7% -43% Zinc LME 98815 1.2%.% 4.2% 11% Shanghai 32926 - -.1% -1.9% -18% Steel LME 4275.% 51.7% 51.7% -8% Precious metals *** Gold 77322.% -.3%.9% 11% Silver 57528.%.3% 1.1% 7% Platinum 1345.%.% 1.9% -2% Palladium 1939.%.% -1.4% -1% Source: DOE, PJK, LME, COMEX, SHFE, Bloomberg, Commerzbank Corporates & Markets Percentage change on previous period 1) 1 month forward, 2) 3 months forward, 3) spot * US inventories of crude oil and oil products in barrel, US natural gas inventories in billion cubic feet, ARA stocks in tons ** tons, *** ETF holdings in ounces 2 16 July 212
Net long positions of money managers vs. price GRAPH1: Crude oil (WTI) 3 25 2 15 1 5 ' contracts Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 spec. net long positions, ls WTI ($/barrel), rs GRAPH 3: Gold 25 2 15 1 5 ' contracts Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 spec. net long posit., ls 12 11 1 9 8 7 6 2 18 16 14 12 1 Gold ($ per troy ounce), rs GRAPH 5: Copper 4 3 2 1-1 -2-3 ' contracts Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 spec. net long positions, ls 11 1 9 8 7 6 Copper ($/ton), rs GRAPH 2: Natural gas (Henry Hub; futures and swaps) 8 ' contracts 6 4 5 4-4 3-8 2-12 1 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 spec. net long posit., ls HenryHub ($/MMBtu), rs GRAPH 4: Silver 5 ' contracts 5 45 4 4 3 35 3 2 25 1 2 15 1 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 spec. net long posit., ls Silver ($ per troy ounce), rs GRAPH 6: Wheat 6 ' contracts 9 4 8 2 7-2 6-4 5-6 4 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 spec. net long posit., ls Wheat (c per bushel), rs GRAPH 7: Corn GRAPH 8: Sugar 5 4 3 2 1 ' contracts 8 7 6 5 4 18 15 12 9 6 3 ' contracts 35 3 25 2 15-1 3 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 spec. net long posit., ls Corn (c per bushel), rs 1 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 spec. net long posit., ls sugar (c per pound), rs 16 July 212 3
GRAPH 9: Forward curve oil market (WTI) 9 GRAPH 1: Forward curve oil market (Brent) 13 88 99 86 95 84 91 82 Source: NYMEX; Bloomberg, Commerzbank Corporates & Markets GRAPH 11: Forward curve gas market (Henry Hub) 5. 4.5 4. 3.5 3. 2.5 Source: NYMEX; Bloomberg, Commerzbank Corporates & Markets GRAPH 13: Forward curve aluminium (LME) 24 23 22 21 2 19 18 GRAPH 15: Forward curve Nickel (LME) 17 1675 165 1625 87 Source: ICE; Bloomberg, Commerzbank Corporates & Markets GRAPH 12: Forward curve gasoil (ICE) 89 87 85 83 81 1M 8M 15M 22M 29M Source: ICE; Bloomberg, Commerzbank Corporates & Markets GRAPH 14: Forward curve copper (LME) 78 77 76 75 74 GRAPH 16: Forward curve zinc (LME) 195 1925 19 1875 185 16 1M 8M 15M 22M 1825 1M 8M 15M 22M 4 16 July 212
GRAPH 17: Forward curve lead (LME) 2 1975 195 1925 19 1875 GRAPH 18: Forward curve tin (LME) 2 1975 195 1925 19 1875 185 1M 8M 15M 22M 185 1M 4M 7M 1M 13M GRAPH 19: Forward curve wheat (CBOT) 9 85 8 75 7 65 Source: LME, Bloomberg, Commerzbank Corporates & Markets GRAPH 2: Forward curve wheat (MATIF) 26 25 24 23 22 21 6 2 2M 9M 13M 18M 23M 4M 6M 8M 1M 17M 19M Source: CBOT; Bloomberg, Commerzbank Corporates & Markets GRAPH 17 Forward curve corn (CBOT) 8 75 7 65 6 55 Source: MATIF; Bloomberg, Commerzbank Corporates & Markets GRAPH 22: Forward curve soybeans (CBOT) 17 16 15 14 13 12 5 2M 11M 18M 25M 37M 11 1M 7M 13M 17M 23M 27M 41M Source: CBOT; Bloomberg, Commerzbank Corporates & Markets GRAPH 23: Forward curve cotton (NYBOT) 8 78 76 74 72 Source: CBOT; Bloomberg, Commerzbank Corporates & Markets GRAPH 24: Forward curve sugar (NYBOT) 24. 23. 22. 21. 2. 7 5M 1M 15M 2M 25M 3M 19. 3M 1M 15M 22M 27M 34M Source: NYBOT; Bloomberg, Commerzbank Corporates & Markets Source: NYBOT; Bloomberg, Commerzbank Corporates & Markets 16 July 212 5
This document has been created and published by the Corporates & Markets division of Commerzbank AG, Frankfurt/Main or Commerzbank s branch offices mentioned in the document. Commerzbank Corporates & Markets is the investment banking division of Commerzbank, integrating research, debt, equities, interest rates and foreign exchange. The author(s) of this report, certify that (a) the views expressed in this report accurately reflect their personal views; and (b) no part of their compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or views expressed by them contained in this document. The analyst(s) named on this report are not registered / qualified as research analysts with FINRA and are not subject to NASD Rule 2711. Disclaimer This document is for information purposes only and does not take account of the specific circumstances of any recipient. The information contained herein does not constitute the provision of investment advice. It is not intended to be and should not be construed as a recommendation, offer or solicitation to acquire, or dispose of, any of the financial instruments mentioned in this document and will not form the basis or a part of any contract or commitment whatsoever. The information in this document is based on data obtained from sources believed by Commerzbank to be reliable and in good faith, but no representations, guarantees or warranties are made by Commerzbank with regard to accuracy, completeness or suitability of the data. The opinions and estimates contained herein reflect the current judgement of the author(s) on the data of this document and are subject to change without notice. The opinions do not necessarily correspond to the opinions of Commerzbank. Commerzbank does not have an obligation to update, modify or amend this document or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. The past performance of financial instruments is not indicative of future results. No assurance can be given that any opinion described herein would yield favourable investment results. Any forecasts discussed in this document may not be achieved due to multiple risk factors including without limitation market volatility, sector volatility, corporate actions, the unavailability of complete and accurate information and/or the subsequent transpiration that underlying assumptions made by Commerzbank or by other sources relied upon in the document were inapposite. Neither Commerzbank nor any of its respective directors, officers or employees accepts any responsibility or liability whatsoever for any expense, loss or damages arising out of or in any way connected with the use of all or any part of this document. Commerzbank may provide hyperlinks to websites of entities mentioned in this document, however the inclusion of a link does not imply that Commerzbank endorses, recommends or approves any material on the linked page or accessible from it. Commerzbank does not accept responsibility whatsoever for any such material, nor for any consequences of its use. This document is for the use of the addressees only and may not be reproduced, redistributed or passed on to any other person or published, in whole or in part, for any purpose, without the prior, written consent of Commerzbank. The manner of distributing this document may be restricted by law or regulation in certain countries, including the United States. Persons into whose possession this document may come are required to inform themselves about and to observe such restrictions. By accepting this document, a recipient hereof agrees to be bound by the foregoing limitations. Additional notes to readers in the following countries: Germany: Commerzbank AG is registered in the Commercial Register at Amtsgericht Frankfurt under the number HRB 32. Commerzbank AG is supervised by the German regulator Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), Marie-Curie-Strasse 24-28, 6439 Frankfurt am Main, Germany. United Kingdom: This document has been issued or approved for issue in the United Kingdom by Commerzbank AG London Branch. Commerzbank AG, London Branch is authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) and subject to limited regulation by the Financial Services Authority. Details on the extent of our regulation by the Financial Services Authority are available from us on request. This document is directed exclusively to eligible counterparties and professional clients. It is not directed to retail clients. No persons other than an eligible counterparty or a professional client should read or rely on any information in this document. Commerzbank AG, London Branch does not deal for or advise or otherwise offer any investment services to retail clients. United States: This document has been approved for distribution in the US under applicable US law by Commerz Markets LLC ( Commerz Markets ), a wholly owned subsidiary of Commerzbank AG and a US registered broker-dealer. Any securities transaction by US persons must be effected with Commerz Markets. Under applicable US law; information regarding clients of Commerz Markets may be distributed to other companies within the Commerzbank group. This report is intended for distribution in the United States solely to institutional investors and major U.S. institutional investors, as defined in Rule 15a-6 under the Securities Exchange Act of 1934. Commerz Markets is a member of FINRA and SIPC. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. Under no circumstances is the information contained herein to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. In Canada, the information contained herein is intended solely for distribution to Permitted Clients (as such term is defined in National Instrument 31-13) with whom Commerz Markets LLC deals pursuant to the international dealer exemption. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities may not be conducted through Commerz Markets LLC. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon these materials, the information contained herein or the merits of the securities described herein and any representation to the contrary is an offence. European Economic Area: Where this document has been produced by a legal entity outside of the EEA, the document has been re-issued by Commerzbank AG, London Branch for distribution into the EEA. Singapore: This document is furnished in Singapore by Commerzbank AG, Singapore branch. It may only be received in Singapore by an institutional investor as defined in section 4A of the Securities and Futures Act, Chapter 289 of Singapore ( SFA ) pursuant to section 274 of the SFA. Hong Kong: This document is furnished in Hong Kong by Commerzbank AG, Hong Kong Branch, and may only be received in Hong Kong by professional investors within the meaning of Schedule 1 of the Securities and Futures Ordinance (Cap.571) of Hong Kong and any rules made there under. Japan: Commerzbank AG, Tokyo Branch is responsible for the distribution of Research in Japan. Commerzbank AG, Tokyo Branch is regulated by the Japanese Financial Services Agency (FSA). Australia: Commerzbank AG does not hold an Australian financial services licence. This document is being distributed in Australia to wholesale customers pursuant to an Australian financial services licence exemption for Commerzbank AG under Class Order 4/1313. Commerzbank AG is regulated by Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) under the laws of Germany which differ from Australian laws. Commerzbank AG 212. All rights reserved. Version 9.14 Commerzbank Corporates & Markets Frankfurt London Commerzbank AG Commerzbank AG DLZ - Gebäude 2, Händlerhaus Mainzer Landstraße 153 6327 Frankfurt London Branch PO BOX 52715 3 Gresham Street London, EC2P 2XY New York Commerzbank AG 2 World Financial Center, 31st floor New York, NY 1281 Singapore Branch Commerzbank AG 8, Shenton Way, #42-1 Singapore 68811 Hong Kong Branch Commerzbank AG 29/F, Two IFC 8 Finance Street Central Hong Kong Tel: + 49 69 136212 Tel: + 44 27 623 8 Tel: + 1 212 73 4 Tel: +65 6311 Tel: +852 3988 988 6 16 July 212