Speculative Bubble Commodities Blog

Oil prices fall below $55 a barrel

Tue, 09 Jan 2007 00:00:00 +0000

Oil prices today slid to their lowest level in 18 months. Expectations of more mild weather and the large previously bullish investment funds now selling. $55 was a key support level now broken through

Winter in the Northeast (the world's largest heating oil market) has been warmer than normal - which has curbed demand for heating fuels

Expect to see larger U.S. petroleum inventories in this week's government report

The front-month contract (February) hasn't been that low since June 2005

Large funds that held long positions - those that expected prices to rise - have been exiting the market since prices began their downward spiral, exacerbating the decline

Those are the same investment funds that helped drive oil to record highs in 2006. The front-month contract topped $78 a barrel in July

The market is still in a liquidating mode - there has been a jump in short positions in the market

Full article at news.yahoo.com

Natural gas trouble down the line?

Mon, 25 Dec 2006 00:00:00 +0000

The country is awash in natural gas inventories, and mild temperatures have kept demand in check. But the price of this home-heating and power-generation fuel is still soaring above historical norms.

Before 2000, natural gas futures rarely climbed above $3.

front-month natural gas futures traded close to $9 per 1,000 cubic feet late last month

They are now trading near $7

What gives?

A dearth of natural gas storage and pipeline capacity, particularly in the Northeast, raises the risk of bottlenecks during periods of peak demand, and that places abnormally high seasonal pressure on prices -- even when nationwide supplies are bountiful

Natural gas is used to heat roughly 62 million homes in the United States

If natural gas prices do not become more stable, the industry could very well lose market share to coal and nuclear power

as a result of rising demand and insufficient investment in the equipment needed to transport natural gas from producing areas to consuming areas, "we're busting at the seams."

the country's natural gas "plumbing" is under stress partly because longtime supply-and-demand trends are shifting. Production is declining along the Gulf Coast, while rising in segments of the Southwest and the Rockies

At the same time, industrial consumption in the Midwest is down, while Northeast and Southeast power plants are demanding ever more fuel.

At the start of last month, the unofficial start of the winter heating season, inventories of natural gas in underground storage facilities stood at 3.45 trillion cubic feet -- the highest level ever recorded by the government.

"I don't think there'll be any problem with capacity unless some [winter] storm of the century hits, or something like that,"

In another sign of reduced bottlenecking to come, a consortium led by ConocoPhillips, Kinder Morgan Energy Partners LP and Sempra Pipelines & Storage plans to build the Rockies Express pipeline -- a 1,663-mile project, costing $4 billion, to carry natural gas from northern Colorado to eastern Ohio by 2009

Full article at washingtontimes.com

Congress has been focused in recent years on proposals to open up more public lands for natural gas drilling. But analysts said these initiatives alone will not help to lower prices or reduce price volatility if the country's capacity to store and transport this fuel is not significantly increased as well

Commodities to watch for in 2007 = The rising stars from 2006

Tue, 19 Dec 2006 00:00:00 +0000

Analysts think uranium, corn and oranges will likely take the spotlight in 2007. Here are some predictions:

Corn futures have climbed over 40% from the end of last year driven by demand for ethanol - is ethanol emerging as a significant fuel?

2007 may be Florida's smallest orange crop in 15 years The 2005 hurricanes and ongoing crop diseases in Florida have kept the orange crops very small - just one big shortage from driving these prices a lot higher.

Oil to stay high - The requirements of India and China for oil will continue to increase at double-digit percentages - that means prices will stay above $45 and any type of geopolitical event could take them to $85, $90

Natural gas around $6 range through 2007 because of slow growth in additional supplies. The opening of several new liquefied natural-gas terminals in 2008 will help drive prices for the fuel lower after 2008

$775 gold seen in 2007? The 2006 gold market rally got ahead of itself - in the first half of next year, the market will probably move back to the prior highs we saw in early 2006 and as high as $800 - $850 an ounce

Silver is more attractive than gold right now ... setting itself up for a move to the $18 to $20-an-ounce mark by early next year and potentially move up to $25

Copper - Next year, look for a price below $2.50. Look out for supply restrictions, not demand - that's the biggest factor right now. Both copper consumption and imports fell in China

Platinum's outlook isn't much rosier than copper's as users would look to switch to palladium

You want to bet on one commodity in 2007? Make it uranium - the basic material for nuclear technology, and supplies fall far short of meeting global demand as the world seeks alternatives to oil - There was a 42 million-pound shortfall this year -

Full article at fin24.co.za

2007 may well be the year when mainstream investors rediscover hard assets. Precious metals, especially gold, will make headlines that we have not seen for a generation.

All told, commodities are in for an interesting year ahead