Having briefly reached bull market status (ripping 20% off last week’s lows), WTI crude oil is collapsing again this morning as the reality of excess supply and dwindling demand crash on the shores of manipulated futures and ETFs. However much hope was imbued into this rally as “setting the bottom” for oil, it seems the rally was used by ‘investors’ to hedge the downside as bets on a bearish plunge have soared to record highs.
The last time the CME hiked margins across the entire crude oil space was one short week ago, on Tuesday to be specific, when the most important contract, the CL Crude Oil Future, saw its initial margin rise by a little over 4%, from $4070 to $4235.
However, as last week’s subsequent events clearly showed, the margin hike was nowhere near enough to bring some stability to the market, when the crude plunge accelerated toward the end of the week, leading to a near-record rout in the product.
Which perhaps is why moments ago the CME once again hiked both initial and maintenance margins across the board for some 151 pages worth of futures contracts, only this time the required cash for initial positions or to maintain existing spec bets for the front month contract was increased four times as much, from $4235 to $4895…
... which means the weekly increase in crude margins is now about 20%, which also means that those specs who were in margined, money-losing positions until today, will have to pony up substantially more cash, or else the crude dump will resume and rather quickly. Unless of course, the recently most margined positions happen to be new shorts, who would now rush to cover.
Western energy firms are noted for venturing into volatile regions and areas that scare off more faint-hearted capitalists.
But one country is even giving these hardened energy companies pause – Afghanistan.
On 22 September Afghanistan issued a bid for tenders to exploit its vast mineral and hydrocarbon wealth, but found no important takers.
Why is that?
As the U.S. government’s Bureau of Economic and Business Affairs February “2013 Investment Climate Statement – Afghanistan” report dryly noted, “Security threats limit investors’ opportunities to develop businesses in some provinces, and certain sectors (such as mining and hydrocarbons) still lack a regulatory environment that fully supports investment. Domestic and foreign investors also rank endemic corruption high on the list of impediments.” The report then optimistically adds, “Despite these challenges, Afghanistan’s investment climate presents opportunities in all sectors of the economy.” Read More
Cargoes of Abu Dhabi’s Murban crude oil traded at their highest premium in almost six years on Thursday, as signs of tightness in the physical oil market spread to lighter crudes, and those destined for Asian markets.
Murban, a flagship crude of the United Arab Emirates, a leading member of Opec, the oil producers’ cartel, is a relatively light crude, almost exclusively exported to Asia.
Strong demand for Murban is the latest indication that tightness in the sour crude market – a result of the slump in Iranian exports after US-led sanctions were imposed last year – is spreading to other markets and regions, as supply disruptions intensify.
Unexpected supply outages from Libya to the North Sea have been pushing oil prices higher for several weeks, while in recent days renewed unrest in Egypt, a key transit point for trade in oil, has added to upward momentum.
In the futures market, where contracts representing many millions of barrels of oil are traded every day, Brent, the global benchmark, hit a four-month high of $111.53 per barrel on Thursday. Read More
India’s consumption of gold rose to 310 tonnes in the second quarter ended June, highest in the last 10 years, despite government curbs to restrict imports to rein in burgeoning current account deficit, a WGC report said today.
Much of the demand was met by stocks that had been built up to healthy levels following the April price drop. Imports more than doubled to 338 tonnes in April-June of this calendar year, it said. Gold consumption stood at 181.1 tonnes in the same quarter last year.
“Consumers in India showed continued strong appetite for gold, with recent government measures to curb demand having had little impact on the quarter’s figures. Consumer demand was 310 tonnes, up 71 per cent on last year,” the World Gold Council (WGC) said in its latest report.
According to WGC India Managing Director Somasundaram PR, “Gold demand in Q2 was best in the last ten years.”
The fall in the gold price last April resulted in an increase in jewellery demand by more than 50 per cent to 188 tonnes in Q2 this year from 124 tonnes in the year-ago period, while bar and coin consumption reached a record high at 122 tonnes from 56.5 tonnes in the review period, he said. Read More
For the first time in many years NYMEX, WTI and Brent Crude price is converging-the gap which traditionally ruled at $10-15 per bbl has now reduced to a mere $ 3-5. Such compression makes a mockery of hitherto Asia Risk premium which was always attributed to turbulence in North Africa and Persian Gulf states. Now it appears Shale may not be able to keep Crude price down either in the US or Globally. This will mean ever more trouble for the impoverished states of Asia and most of Africa.
Oil is above $100 a barrel for the first time since September, as traders worried about disruptions to Mideast supplies after embattled Egyptian President Mohammed Morsi vowed not to resign.
Benchmark oil was up $1.71 to $101.32 at 9:40 p.m. in electronic trading on the New York Mercantile exchange.
Oil last crossed $100 a barrel on Sept. 14.
Morsi demanded late Tuesday that the military withdraw its ultimatum that he meet the demands of protesters or see the constitution suspended and a new leadership installed.
Expectations of a sharp drop in U.S. supplies are also driving the gains. The Energy Department’s weekly report on U.S. stockpiles of crude oil is due out Wednesday
With Petroleum Minister M Veerappa Moily openly batting for importing oil from sanctions-hit Iran by saying that domestic refiners enjoy greater margins on shipments from there, Government sources have rubbished apprehensions emanating from the Persian Gulf nation that these could be efforts of pressurising it into selling its crude at less than global market price.
sources told that there is “absolutely nothing” concrete in fears emanating from Iran that by giving such a statement New Delhi may ask Tehran to sell its oil at cheaper price since that country is hit by sanctions and is not left with much choice.
They added that Iran has been one of the most viable options for oil imports for India and this is the reason why the Government is keen to keep the shipments from the Islamic nation. In fact India has been maintaining the position that the sanctions imposed on Iran by the US and European Union (EU) don’t apply on New Delhi and therefore it won’t be cowed down by the restrictions on that country.
“Our refiners enjoy much better margins as the cost is $2 less and that is why we are seriously engaging with Iran,” Moily had said last Friday. Read More
The European Union investigation into the possible manipulation of oil price benchmarks has widened, with Brussels seeking now information from trading houses, including Glencore, following last week’s raid on oil majors.
The European Commission in recent days sent requests for information to at least Swiss-based commodities titans Glencore, Gunvor and Mercuria, according to people familiar with the situation. The companies declined to comment. There is no suggestion that commodities trading houses are under investigation. The request follows last week’s raids on oil majors BP, Royal Dutch Shell and Statoil.
“They are very generic questions – we are being asked for help, almost as a witness,” said an official at one Geneva-based trading house. Another official at a different trading house added: “It was just a question of time. Everyone and anyone who has any relation to oil trading will receive a request for information”. Read More