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IEA Raises Consumption Forecasts and Warns of Supply Constraints

“The “awakening dragon” that is the growing Chinese economy will help boost oil demand in 2013, the International Energy Agency (IEA) said on Friday as it raised its 2013 demand forecast.

According to the IEA, global oil consumption will rise to 90.8 million barrels per day (bpd), a 240,000 barrels per day increase over its previous estimate.

Overall, 2013 consumption will increase 1 percent on 2012. The organization cited higher winter demand in the fourth quarter of 2012 and heightened expectations for growth in China, the world’s second largest energy consumer, for hiking estimates.

(Read MoreOil Market Going Through ‘Violent’ Structural Change: IEA)

Economic data from China on Friday, showed a pick-up, with growth accelerating to 7.9 percent in the fourth quarter, from a year ago.

After warning in December of “violent structural changes” as the shift in oil demand moves from west to east, the IEA’s latest report likens the global market to a “crouching tiger, hidden dragon,” with increased demand from China and decreased supplies from Saudi Arabia.

But the IEA said the global market has “nothing to worry about” from the dip in Saudi Arabian supplies….”

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Oil Heads for Longest Run of Weekly Gains in 14 Months

“Oil headed for the longest weekly rising streak in 14 months in New York after economic growth accelerated in China, the world’s second-biggest crude consumer.

West Texas Intermediate traded close to a four-month high after gaining the most in two weeks yesterday. The International Energy Agency raised forecasts for global oil demand this year as demand rises in China and said the world oil market is “tighter” than previously estimated. China’s gross domestic product rose 7.9 percent in the fourth quarter from a year earlier, compared with 7.4 percent in the previous period, the National Bureau of Statistics said today in Beijing.

“I don’t think there will be a hard landing in China,” said Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark.

Crude for February delivery was at $95.36 a barrel, down 13 cents, in electronic trading on theNew York Mercantile Exchange at 12:57 p.m. London time. The contract advanced 1.3 percent to $95.49 yesterday. That was biggest gain since Jan. 2 and the highest close since Sept. 17. Prices gained 1.9 percent this week for a sixth straight advance, the longest run of gains since November 2011.

Brent for March settlement slipped 32 cents to $110.78 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $14.99 to WTI futures for the same month. The gap was $15.16 yesterday, the narrowest closing level since July 24….”

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$GS: Au is Going to $12Hundo

“In December, Goldman Sachs commodity analysts caused quite a bit of chatter when they called the end of the bull market in gold.

The bank’s central thesis is that the U.S. economic recovery finally takes off in 2013, and Goldman expects that to drive a selloff in the gold market as investors rotate away from traditional “safe-haven” investments.

At the time, the analysts wrote, “We lower our 3-, 6- and 12-mo gold price forecasts to $1,825/toz, $1,805/toz and $1,800/toz and introduce a $1,750/toz 2014 forecast. While we see potential for higher gold prices in early 2013, we see growing downside risks.”

Now, Goldman has decided to up the ante a bit. Yesterday, its commodity analysts introduced a new call: gold at $1200 per ounce by 2018.

In a note to clients, Goldman analysts Christian Lelong, Max Layton, Damien Courvalin, Jeffrey Currie, and Roger Yuan write, “Assuming a linear increase in US real rates back to 2.0% by 2018, as proxied by the 10-year US TIPS yield, we expect that gold prices will continue to trend lower over the coming five years and introduce our long-term gold price of $1,200/oz from 2018 forward.”

What about monetary demand for gold and inflation, though?

The analysts answer that question:

Beyond real interest rates, fluctuations in the monetary demand for gold also exert an influence on gold prices. Our forecast currently embeds physical gold demand from ETFs and central banks growing in 2013 at the 2009-2012 pace, with ETF purchases slowing in 2014. In our forecast, this steady monetary gold demand helps slow the decline in prices over the coming years. Given the risk around this assumption, we also considered alternative paths for physical gold demand but found that, while not negligible, the impact of gold prices to stronger or weaker monetary demand for gold remains modest compared to the influence exerted by real rates and the Fed’s QE. As a result, it would require a significant further increase in monetary demand for gold to change our outlook for gold prices. While a very significant increase in monetary gold demand by EM investors and central banks could hold the potential for such a large impact, it is also worth noting that a decline in gold prices pushing ETF gold holdings sharply lower would in turn precipitate this fall in gold prices….”

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BP Predicts The US Will Be Self-Sufficient In Energy By 2030

“Warnings that the world is headed for “peak oil” – when oil supplies decline after reaching the highest rates of extraction – appear “increasingly groundless,” BP’s chief executive said on Wednesday.

Bob Dudley’s remarks came as the company published a study predicting oil production will increase substantially, and that unconventional and high-carbon oil will make up all of the increase in global oil supply to the end of this decade, with the explosive growth of shale oil in the US behind much of the growth.

As a result, the oil and gas company forecasts that carbon dioxide emissions will rise by more than a quarter by 2030 – a disaster, according to scientists, because if the world is to avoid dangerous climate change then studies suggest emissions must peak in the next three years or so.

So-called unconventional oil – shale oil, tar sands and biofuels – are the most controversial forms of the fuel, because they are much more carbon-intensive than conventional oilfields. They require large amounts of energy and water, and have been associated with serious environmental damages.

While some new conventional oilfields are likely to come on stream before 2020, they will be balanced out by those being depleted.

BP predicts that by 2030, the US will be self-sufficient in energy, with only 1% coming from imports, the company’s analysts predict. That would be a remarkable turnaround for a country that as recently as 2005, before the shale gas boom, was one of the biggest global oil importers. ”

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Black Gold Trades Higher on a Surprise Draw on Inventories

“Oil advanced to the highest level in four months in New York as a surprise drop in U.S. crude inventories countered concern that the global economic recovery may falter and curb fuel demand.

West Texas Intermediate advanced as much as 0.7 percent to $94.87 a barrel, its highest intraday price since Sept. 19. WTI’s discount to Brent futures narrowed to less than $15 a barrel for the first time since July after the start of an expanded pipeline that is set to pare a glut in the U.S. Midwest. Crude supplies slid 951,000 barrels last week, Energy Department data showed. They were forecast to increase by 2.2 million, according to a Bloomberg survey.

“We may see oil demand picking up in the U.S. and this could support prices,” said Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, who predicts Brent may rise as high as $120 a barrel this quarter. “But the supply situation is comfortable.”

WTI for February delivery was at $94.76 a barrel, up 52 cents, in electronic trading on the New York Mercantile Exchange as of 12:19 p.m. London time. The contract climbed 96 cents to $94.24 yesterday, the highest close since Sept. 18.

Brent for March settlement on the London-based ICE Futures Europe exchange gained 64 cents to $110.32 a barrel. The European benchmark’s premium to WTI earlier narrowed to $14.98, the smallest gap July 25.

Cushing Glut…”

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Upcoming Currency Wars May Help Metals to Shine Again

“As nations see Japan’s success in weakening the yen (see discussion), some begin to take notice. Emerging markets nations often attempted to devalue their currencies in the past in order to improve competitiveness. But these days developed economies are doing it as well. This morning the Russians called these policies “currency wars”, which is a good way to describe the latest developments. And such policies are not limited to Japan.

Bloomberg: – The alert from the country that chairs the Group of 20 came as Luxembourg Prime Minister Jean-Claude Juncker complained of a “dangerously high” euro and officials in Norway and Sweden expressed exchange-rate concern.

The push for weaker currencies is being driven by a need to find new sources of economic growth as monetary and fiscal policies run out of room. The risk is as each country tries to boost exports, it hurts the competitiveness of other economies and provokes retaliation.

Yesterday “will go down as the first day European policy makers fired a shot in the 2013 currency war,” said Chris Turner, head of foreign-exchange strategy at ING Groep NV in London.

In an environment such as this it is somewhat surprising to see gold treading water.

Gold Why Currency Wars are Bullish for Precious Metals

Gold (spot price, source: Barchart.com)

The key concern on the part of precious metals investors is the risk of rising US dollar – as Europe and Japan focus on pushing their currencies lower. Stronger dollar tends to put downward pressure on commodity prices….”

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Newly Completed Pipeline Will Help Supply to Flow and Potentially Send Gas Prices Higher

“…….Here’s the situation:

For years now, there’s been a massive bottleneck of crude at the deposit hub in Cushing, Okla. thanks to America’s domestic crude production boom.

It’s at Cushing that drillers send their product to be bought by refiners. (And it’s where the West Texas Intermediate benchmark price gets its name.)

But because of the supply glut, wholesalers have been able to bid down the price they’ve been paying.

As a result, states with easy access to Cushing product, especially in the Midwest, have enjoyed lower prices in recent years than other states on the East and West Coasts.

Those coast states must buy their oil at the worldwide Brent price.

But the new pipeline, called the Seaway, now has the capacity to carry all that new crude to the coast for export.

This means the bottleneck at Cushing will ease, which means less supply for people who buy at Cushing.

This means…higher gas prices.”

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WTI Futures Pop Above Brent Futures as a Surprise Build in Inventories is Reported

WTI is up $0.96

“NEW YORK – The nation’s crude oil supplies decreased last week, the government said Wednesday.

Crude supplies fell by 1 million barrels, or 0.3 percent, to 360.3 million barrels, which is 8.8 percent above year-ago levels, the Energy Department’s Energy Information Administration said in its weekly report.

Analysts expected an increase of 2.5 million barrels for the week ended Jan. 11, according to Platts, the energy information arm of McGraw-Hill Cos.

Gasoline supplies grew by 1.9 million barrels, or 0.8 percent, to 235 million barrels. That’s 3.3 percent more than year-ago levels. Analysts expected gasoline supplies to rise by 3 million barrels.

Demand for gasoline over the four weeks ended Jan. 11 was 0.6 percent less than a year earlier, averaging 8.4 million barrels a day….”

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Black Gold Supplies Increase Helping to Create Some Downside

“Oil traded near the lowest level in almost a week in New York after U.S. crude stockpiles increased and the World Bank cut its economic growth forecasts.

Futures were little changed after slipping the most in almost a month yesterday. U.S. crude supplies gained a second week and inventories rose to a record at Cushing, Oklahoma, the delivery point for West Texas Intermediate, data from the industry-funded American Petroleum Institute showed. An Energy Department report today may show stockpiles climbed by 2.2 million barrels, according to a Bloomberg News survey. OPEC reduced its output to the lowest level in 14 months, a monthly report from the producer group showed.

“Supply in the U.S. is increasingly comfortable as their domestic production of oil and gas burgeons,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London.

Crude for February delivery was at $93.34 a barrel, up 6 cents, in electronic trading on the New York Mercantile Exchange at 1:39 p.m. London time. The contract declined 0.9 percent to $93.28 yesterday, the biggest drop since Dec. 21 and the lowest close since Jan. 9.

Brent for February settlement, which expires today, was 11 cents higher at $110.41 a barrel on the London-based ICE Futures Europe exchange. The more active March contract rose 14 cents to $109.77. The front-month European benchmark contract was at a premium of $17.12 to WTI. It closed at $17.02 yesterday, the narrowest spread since Sept. 19.

Cushing Supplies…”

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Gold Circle Jerks the Flat Line

“Gold declined for the first time in three days in New York as a rally to the highest price in almost two weeks spurred investors to sell and curbed physical demand.

Federal Reserve Bank of Boston President Eric Rosengren said yesterday policy makers may enlarge their $85 billion monthly purchases of debt to meet their twin goals of stable prices and full employment. Treasury Secretary Timothy F. Geithner warned the government’s borrowing limit may be breached as early as next month if the ceiling isn’t raised. The World Bank cut its global growth forecast for this year yesterday.

“The market has had a nice rally and it feels a bit top- heavy,” Afshin Nabavi, a senior vice president at bullion refiner MKS (Switzerland) SA in Geneva, said today by phone. “Physical demand has slowed down a bit. People are holding back, looking for lower prices to get back in the market again.”

Gold for February delivery fell 0.5 percent to $1,675.70 an ounce by 7:52 a.m. on the Comex inNew York. Prices reached $1,684.90 yesterday, the highest since Jan. 3. Bullion for immediate delivery declined 0.2 percent to $1,676.04 in London.

Since 1960, Congress has raised or revised the debt limit 79 times, including 49 times under Republican presidents, according to the Treasury Department.

ETP Holdings…”

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U.S. Gas Exports Surge as Iran Sanctions Crimp Supplies

“At a time when sanctions are causing a slump in Iranian cargoes of liquefied petroleum gas, the U.S. is exporting more fuel than ever, driving up tanker rates for BW Group Ltd. and other ship owners.

U.S. sales (EPD) jumped 27 percent last year as those from Iran fell 18 percent, according to the Energy Department and Joachim Grieg & Co., an Oslo-based shipbroker. Tanker rates will rise 6.7 percent to a record $32,000 a day in 2013, RS Platou Markets AS estimates. The U.S. surge is boosting demand for export terminals and shares of Enterprise Products Partners LP, which operates one in Houston, will gain 10 percent in a year, analyst forecasts compiled by Bloomberg show.

Iranian sales are being curbed by European Union sanctions that prohibit any vessel insured in the 27-nation bloc from carrying the country’s energy products. That applies to about 90 percent of the world’s merchant fleet. LPG, which is used for cooking and in petrochemicals, is a byproduct of natural-gas output and the U.S. is producing more than ever as it taps deposits from previously inaccessible shale rocks.

“In Iran you clearly see the declining trend, but don’t forget the U.S. is expanding, so there’s some substitution,” said Steve Engelen, the Oslo-based head of research at Joachim Grieg. “More buying and selling and shifting trade tends to be positive for shipping.”

Minute Steaks..”

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Cold Weather Keeps Oil Near Four Month Highs


“Oil traded near the highest level in almost four months in New York before reports that may show the economy recovering in the U.S. and as lower temperatures buoy demand for heating fuels.

West Texas Intermediate was little changed after climbing 0.6 percent yesterday. The U.S. East Coast and Midwest will be 5 degrees Fahrenheit (2.8 Celsius) below normal from Jan. 19 to Jan. 23, according to Commodity Weather Group LLC in Bethesda, MarylandRetail sales probably rose for a second month in December, a Bloomberg News survey of economists predicted before Commerce Department data today.

“Colder weather is helping the energy complex,” said Andrey Kryuchenkov, an analyst at VTB Capital in London, who predicts WTI may remain capped at about $95.60 a barrel. “The global oil market looks evenly balanced.”

Crude for February delivery was at $93.70 a barrel, down 44 cents, in electronic trading on theNew York Mercantile Exchange at 12:55 p.m. London time. The contract increased to $94.14 yesterday, the highest settlement since Sept. 18. Prices dropped 7.1 percent last year.

Brent for February settlement was at $111.58 a barrel, down 30 cents, on the London-based ICE Futures Europe exchange. The more-active March contract slipped 20 cents to $110.75. The front-month European benchmark contract was at a premium of $17.89 to WTI futures. It settled at $17.08 on Jan. 11, the narrowest since Sept. 19…”

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Pipelines May Boost the Refinery Sector

“New pipelines may provide new revenue for US refiners, which have seen big gains in 2012 and are now seeking to ride the wave of success.

HollyFrontier Corp (NYSE:HFC), Phillips 66, Tesoro Corp. (NYSE:TSO), Marathon Petroleum Corp. (NYSE:MPC), Valero Energy Corp. (NYSE:VLO) are among those refiners to keep an eye on as margins for turning oil into gasoline narrow.

Why have refiners seen gains of over 85% for 2012? Look at the margins. Because of a glut in US production, these refiners have been able to purchase oil at an average of $17.46/barrel BELOW the global benchmark. This year should see an even better margin.

This margin could narrow by close to 70% with new pipelines. If this happens, refiners are set to have an even better year.

Now it’s all about pipeline expansion. More than 20 new pipelines are scheduled to become operational in 2013—meaning more oil routed to more buyers. Refiners are seeking to cut in on this link and remove the middle man.

It’s a good enough plan to have Standard & Poors 2012 index list refiners fourth out of 154 industry groups.

Phillips 66 and Marathon are leading the run on pipelines, and investors are taking note—investors like Warren Buffet, on whose word the market seems to hang.

Buffet—the owner of Berkshire Hathaway Inc.—is betting on refiners for 2013. He likes the diversification….”

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Gold Bulls Look to Push the Shiny Metal Above $2000 This Year

“Gold bulls have come out of hiding and are returning to the market,  MarketWatch proclaims, and some experts predict the precious metal could surge to new highs.

“Gold remains one of the best long-term safe-haven investments for the risk-averse investor despite some declines in price at the end of 2012,” David Beahm, vice president of precious metals firm Blanchard & Co., told MarketWatch.

“With as much uncertainty as there is today, and with quantitative easing and fiscal stimulus programs providing only a temporary fix, gold is poised to achieve new highs, somewhere north of $2,000 in the coming year….”

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Commodities Lead the Global Rally As the Yen Hits 20 Month Lows

“The yen weakened to a 20-month low against the euro as traders prepared for more monetary stimulus from the Bank of Japan. (8301) Wheat led commodities higher, while Chinese stocks rose the most in a month as regulators said foreign-investment quotas can increase.

The yen depreciated 0.3 percent to 119.36 versus the euro at 6:15 a.m. in New York after dropping to 120.13. U.S. Treasuries advanced, pushing 10-year yields one basis point lower to 1.86 percent. The Standard & Poor’s GSCI gauge of 24 raw materials rose 0.7 percent, with wheat gaining 2.3 percent. The Shanghai Composite Index jumped 3.1 percent. The Stoxx Europe 600 Index increased 0.1 percent and S&P 500 Index (SPX) futures added less than 0.1 percent….”

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Hedge Fund Redemptions May Behind the Crushing of Gold Prices

“Although it might not pass as willful financial manipulation, hedge fund actions are influencing gold prices, according to Mike Swanson, founder and chief editor of WallStreetWindow, an online community of independent investors and analysts.

The price gold is being suppressed as poor-performing hedge fund — and there are many of them — are forced to meet investor redemptions, he says

But gold will rise again when those redemptions end in a week, predicts Swanson, himself a former hedge manager….”

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Behind the Recent Rise in Black Gold

“Prices for WTI crude have risen above $94 a barrel for the first time in nearly four months today, reaching a high point of $94.70 a barrel on the Nymex. Brent prices have also risen to highs today not seen since October

Two bits of data are behind the rise. The first is the unexpectedly sharp 14.1% jump in Chinese exports during the month of December, raising the country’s trade surplus to $31.6 billion. The rise was accompanied by the importing of an additional 300,000 tons of crude in the month (about 2.2 million barrels).

The second bit of data comes from a source cited by Bloomberg, who said Saudi Arabian crude production fell by 5% in December to 9.025 million barrels a day. The cut in production is clearly an attempt by the Saudis to stabilize the price of crude at around $100 a barrel, their preferred price point….”

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U.S. Funds’ Frank Holmes Puts Out a Report on Commodities, More Sunshine Less Storms

“Frank Holmes, the Chief Investment Officer at U.S. Funds, just published his market outlook for 2013.

In his presentation titles More Sunshine, Less Storms, Holmes offers the key charts that underlie his bullish call on commodities, an asset class that underperformed in 2012.

In short, he argues that much of the uncertainty from last year will be washed away by two major themes: strengthening emerging markets and the rise of American energy production.

There are also some interesting correlations that have emerged between bond flows, equities and gold.

Check it out.

Thanks to US Funds for giving us permission to feature this presentation.

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Brent Hits a Three Month High on China Data


“Oil rose to its highest level in almost three months in London amid signs of growth in China, the world’s second-largest fuel consumer, and as Saudi Arabia, the biggest crude exporter, reduced supplies.

Brent futures advanced as much as 1.4 percent to the highest since Oct. 18 after China’s customs agency reported overseas sales jumped 14 percent in December from a year earlier, exceeding the 5 percent median forecast in a Bloomberg survey. The nation imported 271 million metric tons of crude last year, 6.8 percent more than in 2011, according to the Beijing-based General Administration of Customs. Saudi Arabia reduced its crude production in December to a 19-month low, said a Gulf official with knowledge of the kingdom’s energy policy.

“The Chinese data is allaying concerns of a hard landing,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London, who predicts Brent crude may advance to $115 a barrel this month. “Saudi Arabia will need to rein in output this year after making up for outages in 2012, and the latest numbers suggest they’re doing this.”

Brent for February settlement on the London-based ICE Futures Europe exchange rose as much as $1.53 to $113.29 a barrel. It was at $112.95 as of 11:54 a.m. local time. The European benchmark was at a premium of $18.58 to the U.S. benchmark, West Texas Intermediate, down from $18.66 yesterday.

WTI Crude for February delivery advanced as much as $1.60 to $94.70 a barrel in electronic trading on the New York Mercantile Exchange, the highest since Sept. 19. Prices lost 7.1 percent in 2012 after three years of gains….”

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