GDP numbers are odd beasts in that they look so far into the past that it is difficult to equate them to current events. At the end of March Crude Oil was below $100, the Banks were yet to announce any rights issues, there were hopes that commodity prices were peaking and FTSE was looking very fragile down at 5500. You get the impression, in recent weeks, that policy makers are being overwhelmed by events that had not been foreseen and this is causing a kind of paralysis in high places. The price of fuel must now be impacting growth across the globe. Any thought that, in the circumstances, the UK government might reduce their tax take (some 70% of the total) to lower the price on the forecourt does not seem to have occurred to anyone.
Commodities Spread Betting, 22 May 08
Dealers bought Crude Oil heavily after the US inventory numbers showed a surprise drop last week, although it has to be said that the inventories had been rising for months. The squeeze in the markets since the end of March is actually managing to make the rise in Gold over 2005 to 2007 look pedestrian. Yesterday’s $4.5 rally is being followed this morning by another $1.50 on the open which means that the price at the pumps is doomed to rise even higher in coming days/weeks.
Oil is probably the single most important commodity in the world economy no matter what macro economists may say when comparing the current situation to the last oil shock in the seventies. The fact that it only comes from a limited number of sources and that most of those are not exactly bosom buddies of the west makes the current situation even more volatile. We might be suffering in the UK but can you imagine what the price is doing to struggling economies in Africa. Yet again we are seeing the effects of inelastic supply on prices. Just enough oil...prices down at $80. Just too little...prices up at $135. And unfortunately there is b****r all we can do about it in the short term.
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Commodities Spread Betting, 21 May 08
Crude Oil continues to scream higher and it is difficult to get too much of a handle on reality in the sector. Shorts are being hung out to dry and even sellers of forward production are now having to buy to cover positions as they are unable to put up the cash for margin calls. At some point the elastic band will snap back but this might be at $150 or $180 dollars just as easily as at the current level. Punters continue to try to find a top but it is unfortunately a mugs game to stand in the way of the stream of buyers.
Commodities Spread Betting, 20 May 08
Gold has broken through the down trend after seeming to have given up again in the middle of last week. Earthquakes and Cyclones add up to uncertainty which is meat and drink to the precious metals markets. The gold prices is now hammering at the $910 level and we really need to see a continuation of the past few days rally otherwise the sellers are likely to get more confident.
Crude Oil is still very near to the all time highs. Supply still seems plentiful (I have not heard of rationing anywhere on the globe) so it will take another piece of bad news to break us higher. Unfortunately bad news seems to be all we get these days so I would not hold my breath expecting a dramatic fall just yet.
Commodities Spread Betting, 19 May 08
On Tuesday we will see the PPI numbers from the US which will tell us...err...that rising Oil, Metals, Food etc etc are probably not too good for PPI numbers. We expect 6.7% YOY but do not be surprised if it is worse.
Last week Crude pushed ahead to another new high of $127.82. This was mainly on fears that China would step up demand for fuel after the earthquake damaged several hydro-electric power plants. Late on Friday the price fell back on news that the Saudis would increase oil production. Brent Crude Oil finished at $124.99, down slightly on the week. The weaker Dollar helped Gold to continue its rally, pushing above $900 to end the week at $904.80.
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Commodities Spread Betting, 15 May 08
A build in crude oil inventories gave bulls the opportunity to take some profit as crude fell back from highs yesterday. However that does not indicate a turn in the trend according to Capital Spreads clients who have bought into this fall as they clearly expect prices to test record highs again in the future.
Commodities Spread Betting, 14 May 08
Oil attempted to mark another record high while oddly enough gold had a sharp drop. Over the past two years oil and gold have moved in the same direction in line with a falling dollar, but it looks like that correlation is finally over. Oil inventories due out today will be closely watched by anyone with interest in the price of crude oil (ie pretty much everyone) to see if they can help put a halt to the bull run.
Commodities Spread Betting, 12 May 08
Oil set new record highs each day last week. A warning from Goldman Sachs that oil could hit $200 resulted in heavy buying of options to purchase oil at that level in December 2008. OPEC did not help matters, blaming speculators, rather than a lack of supply, for the recent jump in prices. Brent Crude finished the week $10 higher at $125.4.
Gold held the $950 support level and bounced $26 on the week to $876.30.
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Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'Commodities Spread Bet May 2008' by DB, updated 23-May-08
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