“Oil traded near the highest price in more than four months in New York as the Federal Reservemaintained an asset-purchase program to boost the economy of the world’s largest crude-consuming nation.

West Texas Intermediate was little changed, heading for the biggest monthly gain since August. The Fed will keep buying securities at a rate of $85 billion a month, the Federal Open Market Committee said after a two-day meeting. German unemployment unexpectedly declined in January for the first time in 10 months, adding to signs that Europe’s largest economy is gathering pace. Oil gained a third day yesterday even after data showed U.S. crude stockpiles rose twice as much forecast.

“The Fed is still providing enough money,” said Andy Sommer a senior oil analyst at Axpo Trading AG in Dietikon, Switzerland. “I’m pretty optimistic on the demand side. But there’s an ongoing supply overhang and prices should come down in the spring.”

WTI for March delivery was at $97.75 a barrel in electronic trading on the New York Mercantile Exchange, down 20 cents, as of 1:08 p.m. London time. The average volume of all contracts traded was 21 percent below the 100-day average. Futures gained 37 cents to $97.94 yesterday, the highest close since Sept. 14. Prices are up 6.5 percent in January and poised for a third monthly increase, the longest rising streak since April 2011.

Brent for March settlement on the London-based ICE Futures Europe exchange was at $114.85 a barrel, down 5 cents. The average volume of all contracts traded was 6.3 percent below the 100-day average. The European benchmark grade was at a premium of $17.04 to WTI futures, from $16.96 yesterday.

Crude Inventories..”

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Take notice as we have a solid double bottom in place.

Full look

Currently WTI is paring gains, but still up on the day…

Full oil supply report

“NEW YORK (Reuters) – American Eagle silver coin sales in January surged to an all-time monthly high as the U.S. Mint resumed sales after huge demand triggered a brief suspension, and gold coins also posted their best performance since July 2010.

As of January 29, silver Eagle sales for the month were 7.1 million ounces, data from the U.S. Mint’s website showed, surpassing its previous record of 6.1 million ounces set in January 2012. (Graphic: http://link.reuters.com/myb35t)

“Not only do we have clients calling in, they are buying in huge quantities,” said David Beahm, vice president of Blanchard & Co, a New Orleans-based retail coin dealer.

“They are buying the entire 500-ounce boxes that are sealed by the U.S. Mint, that’s what people want right now,” said Beahm, referring to the standard sealed silver Eagle “monster” box containing 500 one-ounce coins the Mint sells only to its handful of authorized wholesalers….”

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“This is not a prediction of future prices of gold and silver; it is an indication of what could happen in a speculative bubble environment based on the history of previous bubbles.

I’ll summarize a simple analysis of past bubbles.

Definitions

• Bubble: A speculative mania in a market that is priced well beyond what the fundamentals and intrinsic value indicate.
• Phase 1: The first phase of the bubble begins with the price bottoming and initiating a long rally. It is often indicated by a triggering event such as Nixon closing the “gold window” on August 15, 1971 – the beginning of the gold and silver bubbles that terminated in 1980. The market rallies for some years, hits a new “all-time” high, and then corrects.

When the market proceeds into a bubble phase, it rallies beyond that new high and continues much higher. The end of phase 1 and the beginning of phase 2 are the point at which the market rallies from its correction low and exceeds its previous high. See the graph of the silver market with the indicated beginning and end points for phase 1 and phase 2.

• Phase 2: The final phase of the bubble starts when the price exceeds the “new high” and then rallies to a much higher and unsustainable level.

I looked at the time and price data for the South Sea Bubble in England from 1719 -1720, the silver bubble from August 1971 to January 1980, the NASDAQ bubble from August 1982 to March 2000, the Japanese Real Estate bubble from 1965 to 1991, the gold bubble from August 1971 to January 1980, and the S&P mini-bubble from August 1982 to March of 2000. A spreadsheet will not display well, so I’ll list my results. Please realize that all prices and dates are approximate – this is “big picture” analysis.

The conclusion is that bubbles start slowly and then accelerate to unsustainable highs (on large volume) that are largely created by greed and fear but not fundamental evaluations. Bubbles generally follow the “Pareto Principle” where approximately 80% of the price move occurs in the LAST 20% of the time. Consider…”

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” New finds of natural gas from shale and other unconventional resources are having a considerable impact on the economy. “You’re seeing service companies, drilling companies, independent oil and gas companies moving into these areas where historically we haven’t had production in over a hundred years,” said Professor David Dismukes, associate director of the Center for Energy Studies at Louisiana State University (LSU). In a recent interview with Mike Chriszt, a vice president in the Atlanta Fed’s research department, Dismukes described the United States as entering an energy renaissance period, with a bright outlook for future reserve development, production, and capital expenditures….”

Full report

BHI, BP, CHK, CVX, COP, EPD, XOM, KMI, NOV, PSX, SLB, RIG, VLO

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“Oil traded close to the highest level in four months in New York after posting the longest run of weekly gains since April 2009, lifted by speculation that a global economic recovery will boost fuel demand.

West Texas Intermediate crude was little changed after climbing for a seventh week. Chinese industrial companies’ profits rose for a fourth month in December, the National Bureau of Statistics in Beijing said yesterday. U.S. government reports today may show durable goodsorders and pending homes sales rose last month, according to Bloomberg News surveys. The market is well supplied, Abdalla El-Badri, secretary-general of the Organization of Petroleum Exporting Countries, said today.

“Prices have been moving upwards from continued better economic data from the world’s two largest consumers, U.S. and China,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “Continued improved data is required to sustain these higher levels as there remains enough uncertainty within the euro zone for prices to fall.”

Crude for March delivery gained 21 cents to $96.09 a barrel in electronic trading on the New York Mercantile Exchange at 12:50 p.m. London time. The volume of all futures traded was 41 percent below the 100-day average. WTI advanced 0.3 percent last week and closed at $96.24 a barrel on Jan. 22, the highest since Sept. 17.

Brent for March settlement dropped 4 cents at $113.24 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was 26 percent below the 100-day average. The European benchmark contract was at a premium of $17.11 to WTI. The gap was $17.40 on Jan. 25.

‘Looking Up’ ..”

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“Crude headed for a seventh weekly advance in New York, the longest run of gains in almost four years, amid signs of global economic growth and concern that oil facilities in North Africa are vulnerable to militant attacks.

West Texas Intermediate crude advanced as much as 0.6 percent as German business confidence rose for a third month in January. The European Central Bank said 278 banks will hand back 137.2 billion euros ($184.4 billion) of its three-year loans next week at the first opportunity for early repayment. The U.K., German and Dutch governments yesterday urged their citizens to leave the Libyan city of Benghazi.

“Global risk sentiment remains fairly upbeat,” said Andrey Kryuchenkov, a commodities analyst at VTB Capital in London, who predicts WTI will trade from $93 to $97 a barrel over the next month.

Crude for March delivery gained as much as 54 cents to $96.49 a barrel and was at $96.38 in electronic trading on the New York Mercantile Exchange at 12:30 p.m. London time. Futures climbed 0.8 percent to $95.95 yesterday and are up 0.9 percent this week. A seventh weekly gain would be the longest rising streak since April 2009. The average volume of all futures traded today was 18 percent below the 100-day average.

Brent for March settlement gained as much as 56 cents to $113.84 a barrel on the London-based ICE Futures Europe exchange, the highest since Oct. 17. The European benchmark contract was at a premium of $17.35 after contracting to $15.16 on Jan. 17, the narrowest in almost six months.

Business Confidence…”

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“Coffee output in Central America and Mexico may tumble as a disease affecting foliage spreads, prompting governments to take emergency measures to protect farms responsible for 14 percent of global production.

Guatemala, Central America’s second-biggest coffee grower, may lose a third of its crop because of leaf rust, President Otto Perez Molina said yesterday in Davos, Switzerland. The crop in Costa Rica may be 30 percent to 40 percent smaller because of the fungus, President Laura Chinchilla said in a separate interview in Davos. Coffee exports from Honduras, the region’s biggest grower, will be down 767,000 bags due to leaf rust, also called roya, the Honduras Coffee Institute said.

Coffee production in Mexico and Central America will be 19.7 million bags in the 2012-2013 season that started Oct. 1, the International Coffee Organization estimated in a report on Jan. 9. That is 2.8 percent lower than the previous forecast of 20.3 million bags, data from the London-based group showed. Farmers around the world will harvest 144.1 million bags, the ICO estimates. A bag of coffee weighs 132 pounds.

“In the next few months when demand increases, the market will realize that the countries south of Mexico to Peru do not have the amounts of coffee expected and that there will be less availability of high-quality coffee,” said Ronald Peters, executive director of the Costa Rican Coffee Institute, adding that higher temperatures and below normal rainfall may have helped fuel the outbreak.

Coffee Futures…”

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Not as bad as yesterday, but Au is off $4 and Ag is down $0.20

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“Morgan Stanley Thursday cut its outlook on gold prices for the year ahead, but reiterated its view that macroeconomic conditions remain favorable for further price appreciation in the yellow metal.

The bank cut its average price forecast for gold this year by 4% to $1,773 a troy ounce. It also cut its silver price outlook for 2013 by 4% to $33.44/oz.

“We remain bullish on the gold price outlook in 2013 despite recent selling pressure triggered by market concerns of an earlier-than-previously-anticipated tightening in U.S. monetary policy,” the bank said.

“We expect that very low nominal interest rates, an ongoing commitment to QE3, and a below-par recovery with attendant pressure on the U.S. easing will still combine to encourage investment buying of gold, despite elevated prices,” it added.

Silver should continue to outperform gold on a relative basis this year, despite expected volatility, it added….”

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Currently WTI is up $0.44…

“Oil traded near the lowest level in a week in New York after U.S. crude stockpiles gained and capacity on the Seaway pipeline was reduced.

West Texas Intermediate was little changed after dropping yesterday by the most in a month. Crude supplies rose by 3.2 million barrels last week, the biggest increase in six weeks, the industry-funded American Petroleum Institute said. An Energy Department report today may show inventories climbed by 2.2 million barrels, according to a Bloomberg News survey. London- traded Brent’s premium to WTI widened yesterday after Enterprise Products Partners LP (EPD) said capacity was limited on the Seaway link, curbing shipments from Cushing,Oklahoma, the delivery point for New York futures.

“The market could resume its move lower should the Energy Department report this afternoon confirm robust gains in U.S. crude inventories,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in an e-mail. Prices may decline to $93 a barrel, he said.

WTI crude for March delivery was at $95.43 a barrel, up 20 cents, in electronic trading on theNew York Mercantile Exchange at 11:57 a.m. London time. The contract dropped $1.45 yesterday, the most since Dec. 21, to the lowest closing level since Jan. 16. The average volume of all futures traded was 63 percent above the 100-day average.

Brent for March settlement was at $112.59 a barrel, down 21 cents, on the London-based ICE Futures Europe exchange. The number of futures traded was 35 percent higher than the 100-day average. The European benchmark contract was at a premium of $17.06 to WTI futures, down from $17.57 yesterday. The gap was $15.16 on Jan. 17, the narrowest in almost six months….”

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“…..Silver has now rallied for 7 days due to the flood of inflows into silver backed ETF’s and investment demand for coins and bars internationally. Analysts polled by Reuters expect silver to rise in 2013.

Holdings of iShares Silver Trust, the world’s largest silver ETF, stood at 10,689 tonnes on Jan. 22, up 604.9 tonnes, or nearly 6 percent, from the end of 2012.

By comparison, SPDR Gold Trust, the world’s top gold ETF, saw an outflow of nearly 15 tonnes so far this year.

This has helped silver prices rally over 6% so far this year and 4.5% last week alone. The close above $32/oz yesterday was bullish technically and could lead to silver testing the next level of resistance which is at $34/oz.

The U.S. Mint has sold out of 2013 American Eagle silver coins and will resume sales the week of January 28 when the US Mint said inventory would be replenished.

Chinese silver turnover surged to 2,200 tonnes on Friday and analysts say Chinese investor’s interest in silver is continuing to rise as many are looking at silver as a cheaper alternative to gold.

Hence, trading volumes for the precious metal on the SGE soared in 2012….”

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“SAN FRANCISCO (MarketWatch) — Platinum costs more than gold again, a shift that reflects rising confidence in the global economy and investors’ bets the Federal Reserve is closer to ending its massive stimulus efforts.

Platinum prices settled with a premium over gold earlier this week for the first time since March 2012. As of Thursday’s futures settlement, platinum PLJ3 +0.26%  cost $1,700.50 an ounce, almost $10 more than gold GCG3 +0.23%  at $1,690.80 an ounce.

“Platinum’s premium (or discount) to gold offers a measure of economic confidence” because platinum is “so industrially useful, while gold is primarily a store of value,” said Adrian Ash, London-based head of research at BullionVault.

Platinum’s higher cost versus gold is a return to what had been a more normal relationship between the metals from about the mid-1990s until Sept. 2011, when gold prices started to consistently top that of platinum’s.See Commodities Corner from Sept. 2011 on gold, platinum ratio shift.

When the gold-platinum ratio is low, it points to increasing economic uncertainty and weakness worldwide, said Jan Skoyles, head of research at The Real Asset Company, a precious-metals investment platform provider.

“In 2011, we saw both the economy weakening and monetary problems increasing,” she said. “During times such as those, investors take flight into gold as it acts as a safe-haven in such situations.”

Gold is “not an industrial metal — it is money without counterparty risk and therefore is attractive in such times, unlike platinum, which reacts badly to weak economic conditions and currency issues,” said Skoyles.

Differing roles

Platinum and gold are both considered precious metals and prices often move in the same direction, but they also have very different sources of demand….”

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Source

“Nebraska Gov. Dave Heineman notified the Obama administration Tuesday that he has approved the controversial Keystone XL Pipeline to traverse his state, marking a significant step toward reviving the project after President Obama and Secretary of State Hillary Clinton sidelined it. 

The governor approved a revised route for the Canada-to-Texas pipeline which his office said would avoid environmentally sensitive areas.

The decision on final approval now rests with the Obama administration.”

“India, the world’s largest bullion buyer, increased taxes on gold imports to reduce a record current-account deficit and moderate demand for the precious metal that’s rallied for 12 straight years.
The duty on gold and platinum imports was raised to 6 percent immediately from 4 percent, Economic Affairs Secretary Arvind Mayaram told reporters in New Delhi yesterday. A levy on gold ore, concentrate and so-called dore bars for refining will be doubled to 4 percent, and an excise tax on refined gold will climb to 5 percent from 3 percent, the customs said on its website. The tariff will be reviewed if imports moderate, Mayaram said.

Increased taxes may reduce demand in Asia’s third-largest economy after prices jumped 7.1 percent in 2012 as investors and central banks boosted purchases. About 80 percent of India’s current-account deficit, the broadest measure of trade, tracking goods, services and investment income, is due to gold imports, according to the Reserve Bank of India….”

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Brent is currently up $0.27 while WTI is down $0.20…

“Brent crude advanced to the highest level in more than a week as Japan’s central bank said it will expand asset purchases to lift the world’s third-biggest oil consumer out of the recession.

Futures rose as much as 0.7 percent to the highest since Jan. 10. The Bank of Japan (8301)will introduce open-ended asset purchases from January 2014 to boost the economy. Euro-area finance ministers yesterday approved a payout of 9.2 billion euros ($12.3 billion) to Greece this month.

“Expectations for stimulus in Japan have been propping up markets in otherwise thin trading,” said Andrey Kryuchenkov, an analyst at VTB Capital in London who predicts Brent may find resistance at $112.50 a barrel this month.

Brent for March settlement climbed as much as 77 cents to $112.48 a barrel, and traded for $112.18 as of 12:22 p.m. on the ICE Futures Europe exchange in London. The average volume of all contracts was 17 percent higher than the 100-day average. The benchmark was at a premium of $16.24 to New York crude futures. The spread was $15.16 on Jan. 17, the narrowest level based on closing prices since July 24.

West Texas Intermediate for February delivery, which expires today, was at $95.49 a barrel, down 7 cents, in electronic trading on the New York Mercantile Exchange. The more active March contract was at $95.97. Yesterday’s transactions will be booked with today’s trades for settlement purposes as there was no floor trading because of the Martin Luther King Jr. Day holiday in the U.S….”

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From The Big Picture

“Spot market

prices for liquefied natural gas (LNG) have reached $18 per million BTUs and could go higher this year as supplies of the fuel appear to be softer than many traders had originally thought. LNG production dropped sharply in 2012 and is expected to grow only slightly this year.

Most of the world’s supply of LNG is delivered under long-term contracts, which means that any disruption to energy supplies caused by natural or man-made disasters could push spot prices sharply higher almost instantly….”

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