site do yahoo:
http://finance.yahoo.com/news/New-drilling-method-opens-apf-910066319.html?x=0&sec=topStories&pos=2&asset=&ccode=
quinta-feira, 10 de fevereiro de 2011
shale oil
do yahoo:
Skip navigation
* New User? Register
* Sign In
* Help
Trending: Queen Rania
* Yahoo!
* Mail
* My Yahoo!
* News
* Finance
* Sports
Yahoo! Finance
Search Web Search
streaming quotes: OFF
help
{ "market" : {"NAME" : "", "ID" : "us", "TZ" : "", "TZOFFSET" : "-18000", "open" : "", "close" : "", "flags" : ""} ,"STREAMER_SERVER" : "http://streamerapi.finance.yahoo.com" ,"arrowAsChangeSign" : false ,"throttleInterval": "1000","localize":"0" ,"region": "US","lang" : "en-US","mu":"1" ,"up_arrow_icon" :"http://l.yimg.com/a/i/us/fi/03rd/up_g.gif" , "down_arrow_icon":"http://l.yimg.com/a/i/us/fi/03rd/down_r.gif" ,"up_color" :"green" , "down_color":"red","pass_market_id" : "0","market_status_yrb" :"YFT_MARKET_WILL_OPEN"}
* Home
* Investing
o Market Overview
o Market Stats
o Stocks
o Mutual Funds
o ETFs
o Bonds
o Options
o Industries
o Currencies
o Education
o Commodities
* News & Opinion
o Markets
o Investing Ideas
o Expert Advice
o Special Editions
o Company Finances
o Providers
o Video
* Personal Finance
o Banking & Budgeting
o Career & Work
o College & Education
o Family & Home
o Insurance
o Loans
o Real Estate
o Retirement
o Taxes
o Lifelong Investing
* My Portfolios
o Sign in to access My Portfolios
o Free trial of Real-Time Quotes
* Tech Ticker
Search for share prices
Search for share prices
Finance Search
Thu, Feb 10, 2011, 6:48AM EST - U.S. Markets open in 2 hrs 42 mins
*
*
*
*
New drilling method opens vast oil fields in US
New drilling method opens vast oil fields, raising US output for first time in 2 decades
ap
*
Companies:
o BP p.l.c. Common Stock
o EOG Resources, Inc. Common Stoc
FILE - In this Aug. 19, 2008 file photo, a combine cuts durum near an oil well on Aug. 19, 2008, in Tioga, N.D. Domestic production of oil is rising for the first time in two decades thanks to new drilling techniques that are opening up vast fields of previously out-of-reach oil in the western United States. (AP Photo/James MacPherson, file)
Related Quotes
Symbol Price Change
BP 45.83 0.00
Chart for BP p.l.c. Common Stock
EOG 103.95 0.00
Chart for EOG Resources, Inc. Common Stoc
Follow these stocks
{"s" : "bp,eog","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" : "","j" : ""}
Jonathan Fahey, AP Energy Writer, On Thursday February 10, 2011, 3:55 am EST
A new drilling technique is opening up vast fields of previously out-of-reach oil in the western United States, helping reverse a two-decade decline in domestic production of crude.
Companies are investing billions of dollars to get at oil deposits scattered across North Dakota, Colorado, Texas and California. By 2015, oil executives and analysts say, the new fields could yield as much as 2 million barrels of oil a day -- more than the entire Gulf of Mexico produces now.
This new drilling is expected to raise U.S. production by at least 20 percent over the next five years. And within 10 years, it could help reduce oil imports by more than half, advancing a goal that has long eluded policymakers.
"That's a significant contribution to energy security," says Ed Morse, head of commodities research at Credit Suisse.
Oil engineers are applying what critics say is an environmentally questionable method developed in recent years to tap natural gas trapped in underground shale. They drill down and horizontally into the rock, then pump water, sand and chemicals into the hole to crack the shale and allow gas to flow up.
Because oil molecules are sticky and larger than gas molecules, engineers thought the process wouldn't work to squeeze oil out fast enough to make it economical. But drillers learned how to increase the number of cracks in the rock and use different chemicals to free up oil at low cost. "We've completely transformed the natural gas industry, and I wouldn't be surprised if we transform the oil business in the next few years too," says Aubrey McClendon, chief executive of Chesapeake Energy, which is using the technique.
Petroleum engineers first used the method in 2007 to unlock oil from a 25,000-square-mile formation under North Dakota and Montana known as the Bakken. Production there rose 50 percent in just the past year, to 458,000 barrels a day, according to Bentek Energy, an energy analysis firm.
It was first thought that the Bakken was unique. Then drillers tapped oil in a shale formation under South Texas called the Eagle Ford. Drilling permits in the region grew 11-fold last year.
Now newer fields are showing promise, including the Niobrara, which stretches under Wyoming, Colorado, Nebraska and Kansas; the Leonard, in New Mexico and Texas; and the Monterey, in California.
"It's only been fleshed out over the last 12 months just how consequential this can be," says Mark Papa, chief executive of EOG Resources, the company that first used horizontal drilling to tap shale oil. "And there will be several additional plays that will come about in the next 12 to 18 months. We're not done yet."
Environmentalists fear that fluids or wastewater from the process, called hydraulic fracturing, could pollute drinking water supplies. The Environmental Protection Agency is now studying its safety in shale drilling. The agency studied use of the process in shallower drilling operations in 2004 and found that it was safe.
In the Bakken formation, production is rising so fast there is no space in pipelines to bring the oil to market. Instead, it is being transported to refineries by rail and truck. Drilling companies have had to erect camps to house workers.
Unemployment in North Dakota has fallen to the lowest level in the nation, 3.8 percent -- less than half the national rate of 9 percent. The influx of mostly male workers to the region has left local men lamenting a lack of women. Convenience stores are struggling to keep shelves stocked with food.
The Bakken and the Eagle Ford are each expected to ultimately produce 4 billion barrels of oil. That would make them the fifth- and sixth-biggest oil fields ever discovered in the United States. The top four are Prudhoe Bay in Alaska, Spraberry Trend in West Texas, the East Texas Oilfield and the Kuparuk Field in Alaska.
The fields are attracting billions of dollars of investment from foreign oil giants like Royal Dutch Shell, BP and Norway's Statoil, and also from the smaller U.S. drillers who developed the new techniques like Chesapeake, EOG Resources and Occidental Petroleum.
Last month China's state-owned oil company CNOOC agreed to pay Chesapeake $570 million for a one-third stake in a drilling project in the Niobrara. This followed a $1 billion deal in October between the two companies on a project in the Eagle Ford.
With oil prices high and natural-gas prices low, profit margins from producing oil from shale are much higher than for gas. Also, drilling for shale oil is not dependent on high oil prices. Papa says this oil is cheaper to tap than the oil in the deep waters of the Gulf of Mexico or in Canada's oil sands.
The country's shale oil resources aren't nearly as big as the country's shale gas resources. Drillers have unlocked decades' worth of natural gas, an abundance of supply that may keep prices low for years. U.S. shale oil on the other hand will only supply one to two percent of world consumption by 2015, not nearly enough to affect prices.
Still, a surge in production last year from the Bakken helped U.S. oil production grow for the second year in a row, after 23 years of decline. This during a year when drilling in the Gulf of Mexico, the nation's biggest oil-producing region, was halted after the BP oil spill.
U.S. oil production climbed steadily through most of the last century and reached a peak of 9.6 million barrels per day in 1970. The decline since was slowed by new production in Alaska in the 1980s and in the Gulf of Mexico more recently. But by 2008, production had fallen to 5 million barrels per day.
Within five years, analysts and executives predict, the newly unlocked fields are expected to produce 1 million to 2 million barrels of oil per day, enough to boost U.S. production 20 percent to 40 percent. The U.S. Energy Information Administration estimates production will grow a more modest 500,000 barrels per day.
By 2020, oil imports could be slashed by as much as 60 percent, according to Credit Suisse's Morse, who is counting on Gulf oil production to rise and on U.S. gasoline demand to fall.
At today's oil prices of roughly $90 per barrel, slashing imports that much would save the U.S. $175 billion a year. Last year, when oil averaged $78 per barrel, the U.S. sent $260 billion overseas for crude, accounting for nearly half the country's $500 billion trade deficit.
"We have redefined how to look for oil and gas," says Rehan Rashid, an analyst at FBR Capital Markets. "The implications are major for the nation."
Associated Press writer James MacPherson contributed reporting from Stanley, N.D.
Follow Yahoo! Finance on Twitter; become a fan on Facebook.
Related Headlines
* Petroplus outlines 3-year plan after near collapse - at Reuters
* New drilling method opens vast oil fields in US - AP
* Oil Firms Hit by Hackers From China, Report Says - at The Wall Street Journal
* Watchdog gives US pay czar's legacy a failing grade - at Reuters
* New drilling method opens vast oil fields in US - AP
Related Blog Headlines
* Chevron Sheds Some Spanish Units - Zacks
* Shell Profit Rises, But Misses View - Zacks
* Higher Rates Buoy Korea Electric - Zacks
* BP Falls Short, Resumes Dividend - Zacks
* Valero Beats Zacks Estimates - Zacks
Related Message Boards
* BP p.l.c. Common Stock
* EOG Resources, Inc. Common Stoc
19 comments
Show:
Post a comment
* Comments 1 - 10 of 19
* First
* Prev
* Next
* Last
*
j
0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
j 5 minutes ago Report Abuse
Soon Coal will be looked at as a cleaner alternative to Oil ... Fracking is an environmental disaster. There is no good news in this story.
Reply
*
thinksalot
0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
thinksalot 9 minutes ago Report Abuse
Don't forget the GTL (gas to liquid) conversion method called the "Fischer-Tropsch" process. This converts natural gas to liquid for transport. Can be transported through existing pipelines or tankers.
Burns clean. Look at the "Pearl GTL" plant in Quatar. Will be ready in 20ll. The "F-T" process was used in Germany in World War ll.
Reply
*
annie mus
0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
annie mus 10 minutes ago Report Abuse
This is pure Oil Industry propaganda. The process is called fracking. It ain't pretty. Research it.
Reply
*
From France
0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
From France 12 minutes ago Report Abuse
The pollution from shale drilling s major, the French have put a moratorium on on shale production until environmental impacts are better known.
What I don't understand is that nobody mentions a new way of recovering this oil by using LPG (liquid gas) which is recovered again after the frac. Yes it is more expensive, but it increases production from the well by up to 30% and the gas is recovered afterwards. Company is called GASFRAC based in Canada. Assume the French and others will figure this out one day...
Reply
*
wayne
1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 1 users disliked this comment
wayne 22 minutes ago Report Abuse
2030....water 50.00 a gallon
Reply
*
A Yahoo! User
0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
A Yahoo! User 28 minutes ago Report Abuse
So the NEW buzzword of the day
FRAC baby FRAC!
Reply
*
bigsix
3 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
bigsix 45 minutes ago Report Abuse
Big deal, the price at the pump will stay the same while oil companies just keep getting richer. They don't care if oil is imported or domestic, they pass any costs on to you and me.
Replies (1)
*
thinksalot
3 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
thinksalot 52 minutes ago Report Abuse
They can also uncap all the wells they capped in OK and TX in the late 70's and early 80's!!!!
Reply
*
A Yahoo! User
1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
A Yahoo! User 53 minutes ago Report Abuse
YouTube "Fracking"
Reply
*
Tizzy
7 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 1 users disliked this comment
Tizzy 1 hour ago Report Abuse
For you who continue to complain about this latest discovery should TRY DOING SOME RESEARCH! Choose your favorite search engine and type in BAKKEN OIL FIELD. The Federal government estimates indicate there is more oil in this find that what Saudi Arabia has remaining in the ground. Couple those numbers to the untapped supply in Alaska and the gulf of Mexico, all controlled by the United States, and you have a supply, based on current consumption rates, that will last 40 - 50 years. In addition, Canada has a huge supply of oil and is willing to export to the United states via a pipeline but OBAMA and the liberals have, as usual, been dragging their feet, leaving America with the only alternative of buying oil from countries who hate us and are charging excessive prices for their product.
So, if you enjoy spending $3 - $5 per GALLON, no problem. For the rest of us, it's time to pressure OBAMA and CONGRESS to get moving! Get the pipeline built to Canada, reduce the restrictions for new refineries and DRILL, DRILL, DRILL!
Replies (2)
* Comments 1 - 10 of 19
* First
* Prev
* Next
* Last
Post a comment
Sign in to post a comment, or Sign up for a free account.
Top Stories
* Stocks down amid UK rate decision, debt jitters - AP
* Report: Hackers in China hit Western oil companies - AP
* New drilling method opens vast oil fields in US - AP
* Watchdog: Gov't pay rules had few lasting effects - AP
AdChoices
Tech Ticker Recent Posts
* Nokia's CEO Demonstrates True Leadership - Henry Blodget
* Under Pressure: Bernanke-Ryan Square Off as Ron Paul Waits in the Wings - Aaron Task
* 2011 Political "Shockers": Obama Ascendant, Biden Gives Way to Hillary - Stacy Curtin
View More
Subscribe to Topics
* Top Stories
o Add to My Yahoo!
o RSS
o Add Alert
* bp Headlines
o Add to My Yahoo!
o RSS
o Add Alert
* eog Headlines
o Add to My Yahoo!
o RSS
o Add Alert
See all RSS links
Copyright © 2011 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten, or redistributed without the prior written authority of The Associated Press.
Yahoo! Finance
* Banking & Budgeting
* Calculators
* Currency
* ETFs
* Experts
* Investing
* Insurance
* Market Stats
* Message Boards
* Mobile
* Personal Finance
* What's New
Also on Yahoo!
1. Autos
2. Finance
3. Flickr
4. Games
5. Groups
6. Health
7. Hot Jobs
8. Mail
9. Maps
10. Movies
11. Music
12. My Yahoo!
13. News
14. Shopping
15. Sports
16. Travel
17. TV
18. Video
19. » All Y! Services
Things To Do
* Read Our Blog
* Finance on Your Phone
* Check Home Values
* Find a New Car
* Search Jobs Across the Web
Yahoo! Finance Worldwide
* Argentina
* Australia
* Brazil
* Canada
* China
* Chinese
* France
* French Canada
* Germany
* Hong Kong
* India
* Italy
* Japan
* Korea
* Mexico
* New Zealand
* Singapore
* Spain
* Spanish
* Taiwan
* UK & Ireland
* USA
Copyright © 2011 Yahoo! All rights reserved. Privacy Policy - About Our Ads - Terms of Service - Copyright Policy - Report Problems - Yahoo! News Network
Quotes delayed, except where indicated otherwise. Delay times are 15 mins for NASDAQ, NYSE and Amex. See also delay times for other exchanges. Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page.Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quotes are delayed at least 15 minutes. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.
Fundamental company data provided by Capital IQ. Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data, daily updates, fundAnalyst estimates data provided by Thomson Financial Network. All data povided by Thomson Financial Network is based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon.
2142203358
*
*
*
*
*
*
*
*
*
*
Skip navigation
* New User? Register
* Sign In
* Help
Trending: Queen Rania
* Yahoo!
* My Yahoo!
* News
* Finance
* Sports
Yahoo! Finance
Search Web Search
streaming quotes: OFF
help
{ "market" : {"NAME" : "", "ID" : "us", "TZ" : "", "TZOFFSET" : "-18000", "open" : "", "close" : "", "flags" : ""} ,"STREAMER_SERVER" : "http://streamerapi.finance.yahoo.com" ,"arrowAsChangeSign" : false ,"throttleInterval": "1000","localize":"0" ,"region": "US","lang" : "en-US","mu":"1" ,"up_arrow_icon" :"http://l.yimg.com/a/i/us/fi/03rd/up_g.gif" , "down_arrow_icon":"http://l.yimg.com/a/i/us/fi/03rd/down_r.gif" ,"up_color" :"green" , "down_color":"red","pass_market_id" : "0","market_status_yrb" :"YFT_MARKET_WILL_OPEN"}
* Home
* Investing
o Market Overview
o Market Stats
o Stocks
o Mutual Funds
o ETFs
o Bonds
o Options
o Industries
o Currencies
o Education
o Commodities
* News & Opinion
o Markets
o Investing Ideas
o Expert Advice
o Special Editions
o Company Finances
o Providers
o Video
* Personal Finance
o Banking & Budgeting
o Career & Work
o College & Education
o Family & Home
o Insurance
o Loans
o Real Estate
o Retirement
o Taxes
o Lifelong Investing
* My Portfolios
o Sign in to access My Portfolios
o Free trial of Real-Time Quotes
* Tech Ticker
Search for share prices
Search for share prices
Finance Search
Thu, Feb 10, 2011, 6:48AM EST - U.S. Markets open in 2 hrs 42 mins
*
*
*
*
New drilling method opens vast oil fields in US
New drilling method opens vast oil fields, raising US output for first time in 2 decades
ap
*
Companies:
o BP p.l.c. Common Stock
o EOG Resources, Inc. Common Stoc
FILE - In this Aug. 19, 2008 file photo, a combine cuts durum near an oil well on Aug. 19, 2008, in Tioga, N.D. Domestic production of oil is rising for the first time in two decades thanks to new drilling techniques that are opening up vast fields of previously out-of-reach oil in the western United States. (AP Photo/James MacPherson, file)
Related Quotes
Symbol Price Change
BP 45.83 0.00
Chart for BP p.l.c. Common Stock
EOG 103.95 0.00
Chart for EOG Resources, Inc. Common Stoc
Follow these stocks
{"s" : "bp,eog","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" : "","j" : ""}
Jonathan Fahey, AP Energy Writer, On Thursday February 10, 2011, 3:55 am EST
A new drilling technique is opening up vast fields of previously out-of-reach oil in the western United States, helping reverse a two-decade decline in domestic production of crude.
Companies are investing billions of dollars to get at oil deposits scattered across North Dakota, Colorado, Texas and California. By 2015, oil executives and analysts say, the new fields could yield as much as 2 million barrels of oil a day -- more than the entire Gulf of Mexico produces now.
This new drilling is expected to raise U.S. production by at least 20 percent over the next five years. And within 10 years, it could help reduce oil imports by more than half, advancing a goal that has long eluded policymakers.
"That's a significant contribution to energy security," says Ed Morse, head of commodities research at Credit Suisse.
Oil engineers are applying what critics say is an environmentally questionable method developed in recent years to tap natural gas trapped in underground shale. They drill down and horizontally into the rock, then pump water, sand and chemicals into the hole to crack the shale and allow gas to flow up.
Because oil molecules are sticky and larger than gas molecules, engineers thought the process wouldn't work to squeeze oil out fast enough to make it economical. But drillers learned how to increase the number of cracks in the rock and use different chemicals to free up oil at low cost. "We've completely transformed the natural gas industry, and I wouldn't be surprised if we transform the oil business in the next few years too," says Aubrey McClendon, chief executive of Chesapeake Energy, which is using the technique.
Petroleum engineers first used the method in 2007 to unlock oil from a 25,000-square-mile formation under North Dakota and Montana known as the Bakken. Production there rose 50 percent in just the past year, to 458,000 barrels a day, according to Bentek Energy, an energy analysis firm.
It was first thought that the Bakken was unique. Then drillers tapped oil in a shale formation under South Texas called the Eagle Ford. Drilling permits in the region grew 11-fold last year.
Now newer fields are showing promise, including the Niobrara, which stretches under Wyoming, Colorado, Nebraska and Kansas; the Leonard, in New Mexico and Texas; and the Monterey, in California.
"It's only been fleshed out over the last 12 months just how consequential this can be," says Mark Papa, chief executive of EOG Resources, the company that first used horizontal drilling to tap shale oil. "And there will be several additional plays that will come about in the next 12 to 18 months. We're not done yet."
Environmentalists fear that fluids or wastewater from the process, called hydraulic fracturing, could pollute drinking water supplies. The Environmental Protection Agency is now studying its safety in shale drilling. The agency studied use of the process in shallower drilling operations in 2004 and found that it was safe.
In the Bakken formation, production is rising so fast there is no space in pipelines to bring the oil to market. Instead, it is being transported to refineries by rail and truck. Drilling companies have had to erect camps to house workers.
Unemployment in North Dakota has fallen to the lowest level in the nation, 3.8 percent -- less than half the national rate of 9 percent. The influx of mostly male workers to the region has left local men lamenting a lack of women. Convenience stores are struggling to keep shelves stocked with food.
The Bakken and the Eagle Ford are each expected to ultimately produce 4 billion barrels of oil. That would make them the fifth- and sixth-biggest oil fields ever discovered in the United States. The top four are Prudhoe Bay in Alaska, Spraberry Trend in West Texas, the East Texas Oilfield and the Kuparuk Field in Alaska.
The fields are attracting billions of dollars of investment from foreign oil giants like Royal Dutch Shell, BP and Norway's Statoil, and also from the smaller U.S. drillers who developed the new techniques like Chesapeake, EOG Resources and Occidental Petroleum.
Last month China's state-owned oil company CNOOC agreed to pay Chesapeake $570 million for a one-third stake in a drilling project in the Niobrara. This followed a $1 billion deal in October between the two companies on a project in the Eagle Ford.
With oil prices high and natural-gas prices low, profit margins from producing oil from shale are much higher than for gas. Also, drilling for shale oil is not dependent on high oil prices. Papa says this oil is cheaper to tap than the oil in the deep waters of the Gulf of Mexico or in Canada's oil sands.
The country's shale oil resources aren't nearly as big as the country's shale gas resources. Drillers have unlocked decades' worth of natural gas, an abundance of supply that may keep prices low for years. U.S. shale oil on the other hand will only supply one to two percent of world consumption by 2015, not nearly enough to affect prices.
Still, a surge in production last year from the Bakken helped U.S. oil production grow for the second year in a row, after 23 years of decline. This during a year when drilling in the Gulf of Mexico, the nation's biggest oil-producing region, was halted after the BP oil spill.
U.S. oil production climbed steadily through most of the last century and reached a peak of 9.6 million barrels per day in 1970. The decline since was slowed by new production in Alaska in the 1980s and in the Gulf of Mexico more recently. But by 2008, production had fallen to 5 million barrels per day.
Within five years, analysts and executives predict, the newly unlocked fields are expected to produce 1 million to 2 million barrels of oil per day, enough to boost U.S. production 20 percent to 40 percent. The U.S. Energy Information Administration estimates production will grow a more modest 500,000 barrels per day.
By 2020, oil imports could be slashed by as much as 60 percent, according to Credit Suisse's Morse, who is counting on Gulf oil production to rise and on U.S. gasoline demand to fall.
At today's oil prices of roughly $90 per barrel, slashing imports that much would save the U.S. $175 billion a year. Last year, when oil averaged $78 per barrel, the U.S. sent $260 billion overseas for crude, accounting for nearly half the country's $500 billion trade deficit.
"We have redefined how to look for oil and gas," says Rehan Rashid, an analyst at FBR Capital Markets. "The implications are major for the nation."
Associated Press writer James MacPherson contributed reporting from Stanley, N.D.
Follow Yahoo! Finance on Twitter; become a fan on Facebook.
Related Headlines
* Petroplus outlines 3-year plan after near collapse - at Reuters
* New drilling method opens vast oil fields in US - AP
* Oil Firms Hit by Hackers From China, Report Says - at The Wall Street Journal
* Watchdog gives US pay czar's legacy a failing grade - at Reuters
* New drilling method opens vast oil fields in US - AP
Related Blog Headlines
* Chevron Sheds Some Spanish Units - Zacks
* Shell Profit Rises, But Misses View - Zacks
* Higher Rates Buoy Korea Electric - Zacks
* BP Falls Short, Resumes Dividend - Zacks
* Valero Beats Zacks Estimates - Zacks
Related Message Boards
* BP p.l.c. Common Stock
* EOG Resources, Inc. Common Stoc
19 comments
Show:
Post a comment
* Comments 1 - 10 of 19
* First
* Prev
* Next
* Last
*
j
0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
j 5 minutes ago Report Abuse
Soon Coal will be looked at as a cleaner alternative to Oil ... Fracking is an environmental disaster. There is no good news in this story.
Reply
*
thinksalot
0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
thinksalot 9 minutes ago Report Abuse
Don't forget the GTL (gas to liquid) conversion method called the "Fischer-Tropsch" process. This converts natural gas to liquid for transport. Can be transported through existing pipelines or tankers.
Burns clean. Look at the "Pearl GTL" plant in Quatar. Will be ready in 20ll. The "F-T" process was used in Germany in World War ll.
Reply
*
annie mus
0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
annie mus 10 minutes ago Report Abuse
This is pure Oil Industry propaganda. The process is called fracking. It ain't pretty. Research it.
Reply
*
From France
0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
From France 12 minutes ago Report Abuse
The pollution from shale drilling s major, the French have put a moratorium on on shale production until environmental impacts are better known.
What I don't understand is that nobody mentions a new way of recovering this oil by using LPG (liquid gas) which is recovered again after the frac. Yes it is more expensive, but it increases production from the well by up to 30% and the gas is recovered afterwards. Company is called GASFRAC based in Canada. Assume the French and others will figure this out one day...
Reply
*
wayne
1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 1 users disliked this comment
wayne 22 minutes ago Report Abuse
2030....water 50.00 a gallon
Reply
*
A Yahoo! User
0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
A Yahoo! User 28 minutes ago Report Abuse
So the NEW buzzword of the day
FRAC baby FRAC!
Reply
*
bigsix
3 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
bigsix 45 minutes ago Report Abuse
Big deal, the price at the pump will stay the same while oil companies just keep getting richer. They don't care if oil is imported or domestic, they pass any costs on to you and me.
Replies (1)
*
thinksalot
3 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
thinksalot 52 minutes ago Report Abuse
They can also uncap all the wells they capped in OK and TX in the late 70's and early 80's!!!!
Reply
*
A Yahoo! User
1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
A Yahoo! User 53 minutes ago Report Abuse
YouTube "Fracking"
Reply
*
Tizzy
7 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 1 users disliked this comment
Tizzy 1 hour ago Report Abuse
For you who continue to complain about this latest discovery should TRY DOING SOME RESEARCH! Choose your favorite search engine and type in BAKKEN OIL FIELD. The Federal government estimates indicate there is more oil in this find that what Saudi Arabia has remaining in the ground. Couple those numbers to the untapped supply in Alaska and the gulf of Mexico, all controlled by the United States, and you have a supply, based on current consumption rates, that will last 40 - 50 years. In addition, Canada has a huge supply of oil and is willing to export to the United states via a pipeline but OBAMA and the liberals have, as usual, been dragging their feet, leaving America with the only alternative of buying oil from countries who hate us and are charging excessive prices for their product.
So, if you enjoy spending $3 - $5 per GALLON, no problem. For the rest of us, it's time to pressure OBAMA and CONGRESS to get moving! Get the pipeline built to Canada, reduce the restrictions for new refineries and DRILL, DRILL, DRILL!
Replies (2)
* Comments 1 - 10 of 19
* First
* Prev
* Next
* Last
Post a comment
Sign in to post a comment, or Sign up for a free account.
Top Stories
* Stocks down amid UK rate decision, debt jitters - AP
* Report: Hackers in China hit Western oil companies - AP
* New drilling method opens vast oil fields in US - AP
* Watchdog: Gov't pay rules had few lasting effects - AP
AdChoices
Tech Ticker Recent Posts
* Nokia's CEO Demonstrates True Leadership - Henry Blodget
* Under Pressure: Bernanke-Ryan Square Off as Ron Paul Waits in the Wings - Aaron Task
* 2011 Political "Shockers": Obama Ascendant, Biden Gives Way to Hillary - Stacy Curtin
View More
Subscribe to Topics
* Top Stories
o Add to My Yahoo!
o RSS
o Add Alert
* bp Headlines
o Add to My Yahoo!
o RSS
o Add Alert
* eog Headlines
o Add to My Yahoo!
o RSS
o Add Alert
See all RSS links
Copyright © 2011 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten, or redistributed without the prior written authority of The Associated Press.
Yahoo! Finance
* Banking & Budgeting
* Calculators
* Currency
* ETFs
* Experts
* Investing
* Insurance
* Market Stats
* Message Boards
* Mobile
* Personal Finance
* What's New
Also on Yahoo!
1. Autos
2. Finance
3. Flickr
4. Games
5. Groups
6. Health
7. Hot Jobs
8. Mail
9. Maps
10. Movies
11. Music
12. My Yahoo!
13. News
14. Shopping
15. Sports
16. Travel
17. TV
18. Video
19. » All Y! Services
Things To Do
* Read Our Blog
* Finance on Your Phone
* Check Home Values
* Find a New Car
* Search Jobs Across the Web
Yahoo! Finance Worldwide
* Argentina
* Australia
* Brazil
* Canada
* China
* Chinese
* France
* French Canada
* Germany
* Hong Kong
* India
* Italy
* Japan
* Korea
* Mexico
* New Zealand
* Singapore
* Spain
* Spanish
* Taiwan
* UK & Ireland
* USA
Copyright © 2011 Yahoo! All rights reserved. Privacy Policy - About Our Ads - Terms of Service - Copyright Policy - Report Problems - Yahoo! News Network
Quotes delayed, except where indicated otherwise. Delay times are 15 mins for NASDAQ, NYSE and Amex. See also delay times for other exchanges. Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page.Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quotes are delayed at least 15 minutes. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.
Fundamental company data provided by Capital IQ. Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data, daily updates, fundAnalyst estimates data provided by Thomson Financial Network. All data povided by Thomson Financial Network is based solely upon research information provided by third party analysts. Yahoo! has not reviewed, and in no way endorses the validity of such data. Yahoo! and ThomsonFN shall not be liable for any actions taken in reliance thereon.
2142203358
*
*
*
*
*
*
*
*
*
*
sábado, 5 de fevereiro de 2011
xpectativas para commodities
do danskebank (pesquisa google)
www.danskeresearch.com
Investment Research — General Market Conditions
In this outlook for commodities in 2011 we discuss five themes that we believe will drive
prices this year. We discuss the essence and implications of each theme below; we also
give an account of the themes outlined as key at the start of 2010. Finally, we provide
revised price forecasts for 2011 and introduce 2012 projections, see commodity-price
forecasts. Notably, we have revised our 2011 forecasts for oil a little higher, and our
projections for next year generally reflect our mildly bullish view on most products.
Some of the issues we pointed to as essential a year ago are still highly relevant. This
apply to the prospects for (further) tightening of market balances, and the potential for the
high correlations of commodities with other asset classes to (eventually) break down. Last
year, we also emphasised the potential for Asia to steer commodity-price developments
and the importance of the region has only grown larger since then. While both fiscal and
monetary policy tightening should be key themes in many countries for years to come,
this is already an central issue in e.g. China and will likely be crucial to commodity
markets this year as well.
Notwithstanding, new topics have surfaced in the past year. The likelihood of the
commodities super-cycle being resumed, and the potential importance of physicallybacked
base-metal ETFs (exchange-traded funds) currently being introduced are
significant developments in our view. But, regulatory changes in response to physical
ETFs and to speculative flows more generally cannot be ruled out. Crucially, we expect
the re-pricing of a commodities super-cycle to be a key theme across commodities and
FX markets in 2011. This is one reason why we expect commodity currencies to perform
well this year; see also FX Top Trades 2011.
Commodities super-cycle intact
Source: Eviews, EcoWin, Danske Markets. Note: the series “real commodity prices” here refers to the first
principal component extracted from the deflated crude oil, base metals and grains prices.
-6
-4
-2
0
2
4
6
1969 1979 1989 1999 2009
Common commodities factor (log real prices) "Super-cycle"
5 January 2011
Important disclosures and certifications are contained from page 16 of this report
Commodities 2011
Five themes to drive the markets this year
Outlook 2011
We outline five themes for
commodities in 2011:
Theme #1: Market balances to
tighten further, shifting forward
curves towards backwardation.
Theme #2: Pricing of a restart of
a decade-long commodities
“super-cycle” on top of businesscycle
fluctuations.
Theme #3: Risk of commodities
decoupling from the dollar – not
least if euro debt woes continue.
Theme #4: Degree and pace of
policy tightening in emerging
markets on both the monetary
and fiscal side.
Theme #5: Introduction of new
physically-backed base-metal
ETFs and regulatory responses.
We have revised our 2011
forecasts for oil a little higher and
introduce mildly bullish 2012
projections for most products.
Chief Analyst
Arne Lohmann Rasmussen
+45 4521 8532
arr@danskebank.dk
Senior Analyst
Christin Tuxen
+45 4513 7867
tux@danskebank.dk
Bloomberg: DRFX
2 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Review of 2010 themes
In January 2010, we highlighted that commodity markets would likely see increasing
focus on the supply side having been driven almost solely by the business cycle in 2009.
Production constraints have clearly surfaced over the past year but economic growth has
continued to be a key driver as well.
Theme #1: Correlations to fade
At the start of last year, we thought that the high correlations between commodity prices
and for example, EUR/USD and equities were set to fade in 2010 as focus seemed likely
to increasingly turn to individual-specific fundamentals for different products. Although a
clear co-movement of commodities and the dollar has broken down for prolonged periods
of time, the relationship between commodities and equities (risk sentiment) has remained
largely intact. The latter implies that investors remain wary of adding (further)
commodity exposure to their portfolios as the diversification benefits now look more
limited than prior to the recession. The fact that a range of commodity markets are now in
(or closer to) backwardation could lure investors going forward, however, as roll yields
turn positive.
Theme #2: No new all-time highs soon
In light of the large stock overhang in place for most raw materials at the start of 2010
and due to the risk of a negative feedback loop with growth, we predicted that new price
records were unlikely to be seen in most commodities in the near future. We did,
however, give two exceptions to this call for gold and copper – indeed, these two metals
have hit new all-time highs this year on the outlook for low interest rates for an extended
period and waning mine supply, respectively.
Theme #3: OPEC still in charge
A year ago, we saw OPEC keeping production broadly unchanged during 2010 in order to
let rising demand work off booming inventories and thus help to stabilise prices. While
output quotas have indeed been kept at end-2008 levels, members’ compliance edged
lower still until the summer. Forward-demand cover for the OECD region has been
stubbornly high as a result, hovering around a lofty 60 days. However, a firm recovery in
OECD demand and expectations of continued vigorous growth in emerging markets have
contributed to a relatively steady market with prices range trading for most of the year.
Yearly changes
Source: Bloomberg, Danske Markets.
Commodities movements in 2010
Source: EcoWin, Danske Markets.
Correlations with oil
Source: EcoWin, Danske Markets.
Gold and copper
Source: EcoWin, Danske Markets.
0 50 100
ICE Brent
API2 coal
Aluminium
Copper
Gold
LIFFE Wheat
% y/y
3 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Theme #4: Flatter curves in sight
The tightening in market balances from both the demand and supply side that we outlined
as a theme for 2010 – and to extend into 2011 – has led forward curves for a range of
products to see clear shifts in levels and slopes alike. Curve flattening has been seen in a
range of markets but most recently so for crude oil where the Brent forward curve is now
broadly flat after having been in contango since the onset of the financial crisis. However,
it is noteworthy that in spring, during the massive sell-off in both the energy and the
metals complex, the oil forward curve in fact shifted into a steep contango as the
Macondo oil spill simultaneously prompted fears over long-term supply. The grains
markets also saw periods of backwardation as adverse weather tightening spot markets
significantly.
Theme #5 Asia to put a solid floor under prices
Finally, we stressed that Asian appetite for commodities would continue to put a solid
floor under prices. While fears over policy tightening in China have spooked commodity
markets every now and again, the Chinese remain key on the demand side for most
products. This is notably clear from the ever-growing attention paid to China’s monthly
commodity import data; in 2010, the market has been taken aback by the continued
strength in copper purchases and by the surge in demand for corn and soybeans. In
contrast, Japanese growth has come in weaker than anticipated and the floor under prices
that we forecast last year has been provided chiefly by the rest of Asia with notably India
an emerging player.
And the unforeseen: weather events!
One of the things that surprised us the most in 2010 was the significant impact of adverse
weather on the agricultural complex. This spurred a rally in grain prices in H2, which
took our relatively bearish call aback. Stocks-to-use ratios declined to less comfortable
levels and we expect to see the lower buffer stocks cause volatility in grains to remain
high in the near term. In the longer term, the recent experience highlights that the impact
on production conditions for a range of commodities from a changing climate with more
extreme weather events as a result is set to be a crucial factor.
Matif milling wheat forward curve
Source: EcoWin, Danske Markets.
Chinese imports of copper
Source: EcoWin, Danske Markets.
4 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Theme #1: Tighter market balances
Heavy market surpluses were seen in most commodity markets in the wake of the global
recession in 2009 as demand fell well below production. In 2010, deficits began to reemerge
– first in copper and more recently in the oil market. We expect to see a more
widespread pattern of tighter market balances in 2011.
Market balances to tighten further
On the demand side of the equation, the fact that our economists now view the global
recovery as being ‘back on track’ after double-dip worries in mid-2010 (see Global
Scenarios, December 2010) suggests that consumption of raw materials should continue
to prove healthy. US and German data has surprised on the upside in recent months, and
even the weak spot during the upturn – Japan – has been showing signs of stronger than
previously projected economic activity. Asia is still going strong, and our economists see
the apparent frontloading of policy rate hikes in China as positive in reducing the
likelihood of more aggressive tightening measures and a harder landing at a later stage,
see Theme #4.
Supply-side issues are also surfacing in key markets. Although these problems may partly
be caused by a setback in capital spending during the credit crunch, we believe capacity
constraints are for now more structural than cyclical in nature; see Theme #2. In short,
mine supply is struggling to expand in copper and nickel – the announcement of mining
super taxes in both Australia and China will only add to the costs associated with
production expansion in the sector. Even in the aluminium industry where smelting
capacity is ample, costs are picking up in the form of both input (bauxite/alumina) and
energy, thus supporting output prices. Finally, oil majors are facing an increasingly
uncertain environment on the supply side as the prospects of expanding output in non-
OPEC countries are growing bleaker – the Macondo oil spill is likely to increase safety
standards and insurance premia for deepwater drilling.
On balance, we think inventories are set for further draws this year. We expect the crude
oil, copper, nickel and corn/maize markets to experience deficits for 2011 as a whole.
Buffers as measured by stocks-to-consumption levels are thus set to decline significantly.
Specifically, we look for OECD forward-demand cover of oil products to decline from
currently 60 days to around 57 days; this would still be an elevated level compared with
the 52-54 days historically preferred by OPEC. As a result, we believe that OPEC will
keep production close to current levels; indeed, the cartel still seems wary of the
sustainability of the global recovery in energy demand.
Base metals weeks of consumption Grains stocks-to-use
Source: CRU, Danske Markets. Source: USDA; Danske Markets.
0
5
10
15
20
25
Copper Aluminium
Hist avg (weeks) 2010 2011 (Danske)
0
5
10
15
20
25
30
35
Wheat Corn
Hist avg (%) 2010 2011 (Danske)
Key points
We expect 2011 to give way to
further tightening of market
balances in oil and metals
Forward curves should eventually
shift into backwardation, offering
opportunities for both consumer
hedging and investors
LME metal stocks
Source: EcoWin, Danske Markets
Crude oil forward-demand cover
Source: IEA, Danske Markets
Senior Analyst
Christin Tuxen
+45 4513 7867
tux@danskebank.dk
47
49
51
53
55
57
59
61
63
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
mean
2005-2009
days
2010
Min/max 2005-2009
2009
5 | 5 January 2011 www.danskeresearch.com
Commodities 2011
In base metals, the copper stocks-to-consumption ratio is currently running at a mere 2.3
weeks – i.e. below the historical average of 3 weeks; we look for a drop to below 2 weeks
this year. In aluminium, the buffer is traditionally higher but the market is at present well
above ‘normal’ levels with stocks available to cover almost 24 weeks of demand; we see
a small drop close to 20 weeks in 2011. For grains, stocks-to-use ratios dropped sharply
in 2010 and corn inventories are now at 16% (of annual world use) – i.e. markedly
outside the 20-40% range which is usually considered a balanced market; we look for a
further decline in 2011 to 12%. Wheat is also approaching less comfortable levels but we
see a broadly balanced market this year as new plantings have increased on the back of
production shortfalls over the past season; stocks-to-use seen stable at around 30%.
Backwardation to lure investor flows
Tighter market balances will most likely affect forward curves. Last year we saw the
crude oil forward curve shift from a pronounced contango form to now being almost flat.
We expect to see the crude curve shifting into a more marked backwardation during the
course of the year. Overall, we see the oil market recovery as taking place in three stages:
off-shore/floating storage being run down (2009/10), on-shore stocks declining (2010/11),
and finally, OPEC spare capacity shrinking (2011/12). Refined oil curves are still in
contango for most products but lighter oil could see curve flattening as industrial activity
continues to add to demand. But, the refining sector is currently seeing a good deal of
capacity additions which should cap price pressure in the front end.
The historically close relationship between US days of supply and the near-term slope
broke down to some extent in 2010. There are good arguments as to why the comovement
may be less pronounced going forward: the market is increasingly behaving in
a forward-looking manner, thus reacting more to expected future tightness and less to
present conditions. Also, the importance of the US in terms of global oil use is declining –
instead Asian market balances will probably prove decisive going forward.
The copper market was one of the first commodity markets to shift into backwardation
after the crisis led to a front-end sell-off in late 2008. LME 3M copper prices have
recently reached new record highs as not least construction activity is starting to gain pace
and a range of mines are struggling with e.g. labour disputes, dragging LME stocks lower.
We think the curve will remain downward-sloping throughout 2011 but developments
further out the curve will depend much on whether new mine projects are announced.
In aluminium, consumption was quick to recover after the recession but LME stocks
merely stabilised in 2010. This kept the aluminium forward curve in contango and
ensured that the widespread business of buying metal spot and selling it forward to lock
in the contango difference (minus funding and storage costs) has continued to be
profitable. Financial deals activity has not led to a marked flattening of the curve but
affect the physical market by tying up a large amount of metal. With interest rates set to
stay low for most of 2011, there is little on the funding side to destroy the party. But, as
yields could pick up towards year-end, financial deals could be unwound (or simply not
rolled over), thereby releasing a lot of aluminium. This could cause downward pressure
on prices. Physically backed base metal ETFs (exchange-traded funds) have the potential
to tighten the aluminium market significantly however, see Theme #5.
All in all, we expect further tightening of market balances in oil and metals markets this
year. For consumers, this is essential because in a backwardation market it is possible to
lock in expenses below the prevailing spot price. From an investor point of view, this is
also crucial as the roll yield obtained from traditional index/futures investment becomes
positive when the curve is downward-sloping. As a result, we expect to see investor
inflows into commodities grow further.
Brent forward curve
Source: EcoWin, Danske Markets.
Crude fwd curve and US days of supply
Source: EcoWin, Danske Markets.
Copper forward curve
Source: EcoWin, Danske Markets.
Commodities speculative flows
Source: BarCap, Danske Markets.
0
10
20
30
40
50
60
70
80 Inflows (bn USD)
6 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Theme #2: Super-cycle resumed
The cyclical rebound in demand (see Theme #1) is, in our view, only one factor set to
drive commodities higher in 2011: we believe the market will soon begin to price a restart
of the so-called “commodities super-cycle” which could remain in place for decades
irrespective of the regular business cycle fluctuations. The notion of a commodities supercycle
– i.e. the idea that scarcity of raw materials combine with rising demand from
emerging economies to drive a cycle that supersedes the ordinary business cycle – is in
our view about to be reignited after having been put on hold during the financial crisis.
Demand and supply factors create “perfect storm”
In terms of demand, activity in Asia has recovered strongly and metals consumption,
within notably the construction sector, is once again on the rise. In addition, the largescale
Chinese infrastructure projects implemented as part of the fiscal stimuli in wake of
the recession are unlikely to mark an end to the country’s need for metals. China is set to
expand, for example, its rail network and power grid extensively going forward. During
2010, China took over the US as the world’s number one energy consumer and together
with an ongoing urbanisation process across emerging markets, this underlines structural
changes likely to support demand for raw materials going forward.
On the supply side, the metals market is increasingly focused on output problems
resulting from falling ore grades and a lack of new mine projects coming on stream. In
particular, the copper market has entered what appears to be a structural stance of deficits
as production is stalling. At the same time, costs are on the rise in the mining sector as a
result of higher mining taxes in key countries and ongoing labour disputes.
In energy markets, the oil spill in the US Gulf of Mexico has fuelled worries over future
restrictions and/or costs associated with deepwater oil drilling. A structural decline in
North-Sea production is just one other factor behind falling non-OPEC oil production.
Notably, the world is set to become increasingly dependent on OPEC for supplies going
forward, but whether Iraqi production can be raised as quickly and cost-effectively as
planned is subject to great uncertainty. However, bright spots from a supply point of view
are advances in natural-gas extraction (e.g. horizontal drilling) and transportation (in the
form of liquefied natural gas, LNG). Indeed, the current “gas glut” could persist for years.
At the same time, extreme weather events resulting from a changing climate worldwide
are likely to continue to affect the agricultural sector in particular – 2010 showed that
adverse weather conditions in key growing regions (e.g. droughts in Russia, flooding in
Pakistan, etc) have the potential to exert massive impact on grain prices as the sector
operates with little spare capacity.
Key points
On top of support from the
business cycle, commodities will
likely receive tailwinds for years
to come from a re-start of the socalled
“commodities super-cycle”.
We believe the market will soon
start to price a re-ignition of a
super-cycle – i.e. the idea that
rising demand for raw materials
from emerging markets couple
with supply constraints to drive
prices higher for an extended
period of time.
Real commodity prices: trend intact
Source: EcoWin, Danske Markets.
Non-OPEC oil supply
Source: IEA, Danske Markets.
Senior Analyst
Christin Tuxen
+45 4513 7867
tux@danskebank.dk
Copper market balance: deficits becoming structural
Source: WBMS, Danske Markets.
Metals cycle
-500000
-400000
-300000
-200000
-100000
0
100000
200000
0
500
1000
1500
2000
1999 2001 2003 2005 2007 2009
1000 tonnes
Consumption Production Market balance (RHS)
Al (log real price)
7 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Super-cycle intact despite crisis
In order to gauge whether the 2008/09 recession led to a break in a commodities supercycle
we, first identify a common factor (in statistical terms, the first principal
component) among real prices for a wide range of commodities, including crude oil, base
metals and grains. All series are annual, in logs, and deflated by US consumer prices. We
then separate the cyclical and non-cyclical component (using a band-pass filter) of the
common factor in order to disentangle the impact of a super-cycle (low frequency) from
the regular business cycle (higher frequency).
Results are similar across oil, metals and grains: in all cases the most recent trough was
observed around the start of the millennium and there are no signs of a cyclical peak
having been reached as a result of the recession. Within the grains complex (wheat, corn,
and soybeans) the common factor explains 97% of the variation in the data; for metals
(copper, aluminium, nickel, zinc, lead, and tin) the corresponding figure is 70% which is
still rather high. When all commodity prices are considered, the common factor accounts
for 68% of the variation. Hence, the apparent super-cycle component on average explains
more than 2/3 of movements seen in real commodity prices over the period from 1969 to
2009.
The difference between the common factor and its super-cycle component highlights that
the 2008/09 sell-off in commodities was merely a business-cycle phenomenon and thus
that this did not mark an end to a broader price upturn. It is also evident from the analysis
that the previous cycle peak was witnessed in the late-1970s around the first oil crisis –
for a long time thereafter commodity prices fell in real terms. Our results are broadly
similar to those presented by the IMF in the World Economic Outlook, October 2010.
Commodities super-cycle intact
Source: Eviews, EcoWin, Danske Markets. Note: the series “real commodity prices” here refers to the first
principal component extracted from the deflated crude oil, base metals and grains prices.
However, we are not uncritical of the super-cycle theory. There is a risk that world
demand for raw materials could suffer from an extended period of below-trend growth.
Also, the supply response to higher prices may be quicker this time compared with
previously due to technological advances. Moreover, in the event that some markets
tighten more than others and to the extent that technology allows, substitution effects may
kick in as well. For example, surging copper prices may lead some manufacturers to
replace the red metal with aluminium if possible, and soaring oil/coal prices may induce
power stations to shift feedstock toward natural gas instead.
Overall, evidence is in our view in favour the idea that the crisis merely posed a pause to
a commodities super-cycle which is still intact. We believe that the market has not yet
priced in the likelihood of this “perfect storm” for commodities but will soon start to do
so. The existence of a super-cycle suggests that the balance of risks for notably metals
and energy prices could lie persistently on the upside for years to come.
-6
-4
-2
0
2
4
6
1969 1979 1989 1999 2009
Common commodities factor (log real prices) "Super-cycle"
Grains cycle
Source: Eviews, EcoWin, Danske Markets.
Business-cycle induced price
movements in real commodity prices
Source: Eviews, EcoWin, Danske Markets.
-5
0
5
0
1
2
3
1969 1984 1999
Corn (log real price)
Soybeans
Wheat
Grains super-cycle
-3
-2
-1
0
1
2
3
1969 1979 1989 1999 2009
Business cycle component
8 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Theme 3: Risk of dollar decoupling
Correlations of commodities with EUR/USD and equities remained at elevated levels for
most of 2010. Risk sentiment was a key driver in daily price movements for most of the
year but temporary decoupling of commodities from the dollar was seen. As double-dip
fears were eventually sidelined on a healthy growth outlook for Asia, the US and core
EMU countries’ commodities continued to head higher. Meanwhile, a risk premium on
the single currency led EUR/USD lower as peripheral-debt fears remained in place.
Look for declining correlation of commodities and the dollar
In 2011 we foresee that risk appetite will continue to be a crucial factor in steering
sentiment in the commodity markets. In contrast, we expect this year to see the
correlation between commodities and the dollar fluctuate a lot and likely decline
somewhat; this highlights the risk associated with relying on a high correlation to provide
an implicit hedge of price risk for a EUR-based consumer/producer. Two scenarios based
on a declining correlation are important to consider from a hedging point of view.
Base scenario: commodities stall as EUR/USD risk premium is priced out
As our economists remain complacent that the euro debt crisis will be contained, the risk
premium attached to the euro at present should gradually start to be priced out. Indeed,
our FX strategists are looking for EUR/USD to rise from the current 1.33 to 1.50 in 12
months. In this process we could see the euro go higher without this giving broad-based
support to dollar-denominated commodity prices, as the latter recently appear to have run
ahead of the currency pair. This scenario – stalling commodity prices combined with
EUR/USD appreciation - should provide attractive hedging opportunities for consumers
as it would offer relatively low commodity prices measured in euros. For producers or
hedgers of inventories, this would be an unfortunate scenario however.
Alternative scenario: commodities surge on global growth outlook but
EUR/USD drops on renewed euro debt fears
An important alternative scenario to consider is the event that debt woes continue to
weigh on the euro whereas strong US growth - not least if employment takes off –
supports the dollar. If EUR/USD is dragged down further as a result, commodities could
nonetheless soar ahead on improving demand prospects. This scenario – rising
commodity prices coupled with EUR/USD depreciation – could be poisonous for EURbased
consumers. On the other hand, clients looking to sell/hedge inventories would
benefit from attractive prices converted into EUR.
In order to illustrate the potential risk associated with relying on a high correlation
between oil and EUR/USD, we do as follows. We first calculate the Brent oil forward
curve in EUR per barrel at the current level of correlation along with the probability
bands implied by option pricing. We then compare this with the implicit forward curve
when the correlation between oil and EUR/USD is set to the minimum level observed
since the year 2000. If oil and EUR/USD moved one-for-one the implicit hedge for a
EUR-based client would be a perfect one as the EUR price would be constant. However,
as illustrated by the charts, the fact that the correlation is imperfect and periodically weak
implies that the implicit risk for a EUR-based consumer may be much larger than the
most recent experience would suggest. As is evident from a comparison of the two 90%
confidence ranges (see charts next page), a decline in the oil-dollar correlation would
significantly increase the sample space for commodity prices measured in euros.
Key points
We expect the correlation of
commodities with equities (risk
appetite) to remain high, but we
highlight that hedging clients
should prepare for some degree
of dollar decoupling in 2011.
As a result, we advise against
relying on EUR/USD movements
to provide an implicit hedge
against commodity-price
fluctuations and we suggest fixing
prices in one’s local currency.
Correlation of oil with EUR/USD and
equities
Source: EcoWin, Danske Markets.
Commodity prices in EUR terms
Source: EcoWin, Danske Markets.
Senior Analyst
Kasper Kirkegaard
+45 45 13 70 18
kaki@danskebank.com
Senior Analyst
Christin Tuxen
+45 4513 78 67
tux@danskebank.dk
9 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Oil in EUR at current USD correlation
Oil in EUR at historical low USD
correlation
Source: Bloomberg, EcoWIn, Danske Markets. Source: Bloomberg, EcoWIn, Danske Markets.
Oil, dollar, risk, inventories, and speculative flows
The high correlation between commodities and the dollar may however derive from the
fact that both are likely to be driven by risk appetite, i.e. improvements in risk sentiment
have a tendency to lead both commodities and EUR/USD higher. In order to investigate
this hypothesis we conduct the following exercise. We first estimate the relationship
between EUR/USD and the oil price and then add equity returns (as a proxy for risk
appetite) and then in turn augment with US inventories and speculative positioning to see
how causal effects of the different variables on oil might change. All data series are taken
to run from the year 2000.
A bivariate model of Brent oil and EUR/USD suggests that there is both a long- and
short-term relation between the two variables and that notably EUR/USD appears to lead
oil rather than the other way around. However, when adding risk appetite as measured by
S&P 500 returns to the model, it becomes evident that movements in equity markets are
potentially more crucial in driving oil prices than the dollar. Brent oil is in the longer run
driven both by EUR/USD and equity returns and as such there is a stationary long-run
relation between the three variables which sees oil prices adjusting in an error-correcting
fashion whenever disequilibria occur. From causality tests, it is clear, however, that in the
short term equity markets drive both EUR/USD and oil prices whereas there is no clear
direct link between EUR/USD and oil once risk sentiment is controlled for.
Importantly, if we take changes in US crude oil inventories into account – usually seen as
a key driver of oil-market fundamentals - the oil price is on a weekly basis largely driven
by changes in stock levels rather than by risk or the dollar. Finally, when adding
speculative positioning we find that there is a borderline significant relation between noncommercial
net long positions in oil at NYMEX and the price. However, causality tests
reveal that in the short run there is a tendency for price rises to precede increases in
investor flows. In other words, there are no clear signs from this model that speculators
have a marked direct effect on prices when other factors (risk, EUR/USD and inventories)
are controlled for. Thus, it appears that speculative flows to large extent chase price rises
rather than the other way around.
Take care when “hedging” commodities via the dollar
In light of the above, we advise clients against relying on a close correlation between
commodity prices and the dollar. Historically, the simple correlation is highly unstable
and the apparent co-movement seems to be driven largely by shifts in a third factor, risk
appetite. Thus, a direct relationship between EUR/USD and commodities is not given by
nature. Crucially, if global risk appetite remains intact but market sentiment towards
Euroland continues to sour, then “risk” would likely be supportive for commodities while
negative for the single currency. The possibility of dollar decoupling is thus a central risk
to the factor in deciding on one’s hedging strategy.
Causality test (daily bivariate model)
p-value
EUR/USD --> Oil 0.09
Oil --> EUR/USD 0.62
Source: Eviews, Danske Markets. Note: a p-value
below 0.05 indicates significant effect at a 5%
probability level.
Causality tests (daily 3D model)
p-value
EUR/USD --> Oil 0.12
S&P500 --> Oil 0
Oil --> EUR/USD 0.49
S&P500 --> EUR/USD 0
Oil --> S&P500 0.28
EUR/USD --> S&P500 0.23
Source: Eviews, Danske Markets.
Causality tests (weekly 4D model)
p-value
EUR/USD --> Oil 0.81
S&P500 --> Oil 0.04
Stocks --> Oil 0.02
Spec flows --> Oil 0.46
Oil --> EUR/USD 0.37
S&P500--> EUR/USD 0.18
Stocks--> EUR/USD 0.25
Spec flows --> EUR/USD 0.07
Oil --> S&P500 0.53
EUR/USD --> S&P500 0.61
Stocks --> S&P500 0.37
Spec flows --> S&P500 0.62
Oil --> Stocks 0.75
EUR/USD --> Stocks 0.8
S&P500 --> Stocks 0.85
Spec flows --> Stocks 0.2
Oil --> Spec flows 0
EUR/USD --> Spec flows 0.09
S&P500--> Spec flows 0.46
Stocks--> Spec flows 0.13
Source: Eviews, Danske Markets.
10 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Theme 4: Chinese policy tightening
In 2011 the developed world will see governments focusing on reducing budget deficits
and central banks preparing exits from (near) zero interest rate policies. Meanwhile, the
focal point in emerging markets will be reining in credit growth while fiscal policy could
remain relatively loose in order to accommodate structural needs for investment in e.g.
infrastructure. Although other Asian countries such as India are growing in importance,
China remains the central consumer in the developing world and we outline its 2011
policy outlook below.
Monetary policy: tightening but not aggressively so
The People’s Bank of China (PBOC) is set to conduct a minor shift in policy from being
accommodative to being ‘prudent’ – in Chinese terminology this usually means neutral.
Following the Christmas Day rate hike, our economists now look for higher policy rates
to be frontloaded into H1 where growth is expected to be strong and inflationary pressure
most severe. The Chinese authorities will probably continue to use a combination of
higher reserve requirements, yuan appreciation, and constraints on credit growth in order
to curb inflationary pressure. The latter tool should be particularly effective in dealing
with the booming property market which is still a key concern. Although no target for
credit growth has been announced yet, it will probably only see a modest decline. Also,
even if China raises interest rates as expected, a real one-year deposit rate will still be
negative.
Despite higher interest rates, the impact from monetary policy on growth could actually
be positive in early 2011. This is because the considerable focus on the part of
policymakers and banks on achieving the annual targets for credit led to relatively tight
credit conditions towards the end of 2010. During Q1, banks should thus again have
ample room to expand loans. This could boost investment demand and imply a strong
start to industrial activity in the new year.
Overall, commodities are thus unlikely to be severely constrained from the monetary side
when it comes to China in 2011. On impact, news of tighter policy measures could still
spur sell-offs in particularly base metals, but in the longer term we think that measures
that limit the risk of a hard landing for the economy will eventually be perceived as
positive by the market. Recent hints that China will use a stronger CNY to rebalance the
economy are also positive for cycle-sensitive commodities as this will increase the
likelihood of longer-term growth sustainability. Gold may suffer from fading risks of a
global currency war though as safe-haven flows should wane.
Fiscal policy: softening impact from lower infrastructure
spending
One of the key factors lifting China out of the financial crisis was the implementation of
massive fiscal stimuli in 2009 and 2010. The programme, which notably involves a
significant amount of spending on infrastructure, was set to run out in 2011 but it now
appears that the government will attempt to soften the negative impact. Policymakers
have maintained the phrase ‘proactive’ to describe fiscal policy – in Chinese terminology
this usually means expansive fiscal policy.
Key points
Policy tightening on both the
fiscal and monetary side will be
vital in most countries in 2011
but Asian developments are likely
to play a key role for rawmaterials
demand.
Commodities will likely be
spooked by news of excess
liquidity being withdrawn but
fiscal policy is set to remain
relatively expansive in China and
thus to give broad-based price
support.
Investment demand often strong early
in the year due to credit targets
Source: EcoWin, Danske Markets.
Negative real deposit rates can feed
asset bubbles
Source: EcoWin, Danske Markets.
Senior Analyst
Flemming J. Nielsen
+45 45128535
flemm@danskebank.dk
Senior Analyst
Christin Tuxen
+45 4513 7867
tux@danskebank.dk
05 06 07 08 09 10
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
-2
0
2
4
6
8
10
12
% 3m/3m
<
% 3m/3m
99 00 01 02 03 04 05 06 07 08 09 10
-6
-4
-2
0
2
4
6
-4 8
-2
0
2
4
6
8
10
12 %-point
Real interest rate, 2-year deposit>>
<< House prices
% y/y
11 | 5 January 2011 www.danskeresearch.com
Commodities 2011
To offset the negative impact from lower infrastructure spending in 2011, the Chinese
government is planning to boost construction of social housing. This implies that the
construction of social housing may be almost doubled this year to 10m units from 5.8m in
2010. In addition, investments will be boosted to support the government’s effort to
improve energy efficiency and environmental protection. On the negative side, however,
the government has simultaneously announced an abolishment of subsidies for auto
purchases from 1 January 2011. This could weigh on auto sales going forward after
strong performance in past years.
All in all, the negative impact on metals demand from infrastructure programmes running
out is set to be smaller than feared, although it could still have some negative
consequences for base metals and energy in 2011. Still, ongoing structural developments
related to the ongoing urbanisation process and adaptation of a Western lifestyle mean
that demand for raw materials should stay strong despite tighter fiscal policy; see also
Theme 2 on the existence/impact of a commodities super-cycle.
‘Goldilocks’ outlook on track but risk of hard landing has risen
Taken together, the above-mentioned factors point to an acceleration of Chinese growth
in H1, driven mainly by stronger investment demand, recovering exports and some
restocking following inventory cuts in Q2 and Q3 last year. Rate hikes are unlikely to
have much impact in the near term. We see Chinese GDP growth entering double-digit
territory in H1 and hence exceed long-run sustainable levels.
We expect inflation to accelerate again soon thereafter and to stay above 5% y/y into Q2.
In H2, we forecast that GDP growth will slow to below potential on the back of monetary
tightening. But, it should prove a soft landing as PBOC will eventually pause the
tightening cycle. Indeed, it is crucial that Chinese inflation has so far mainly been driven
by higher food prices. In the absence of negative disturbances to the supply of agricultural
commodities, inflation is poised to ease substantially in H2.
Nevertheless, there is a substantial risk that the slowdown after the summer could be
more severe than our base scenario. This would be the case if inflation increases more
than our forecast and thus forces PBOC to tighten monetary policy more aggressively.
This could be triggered by further price increases, e.g. for grains. This will in turn depend
largely on the weather at key stages in the crop-growing cycle in the relevant countries.
Chinese demand benign for commodities but keep eye on supply
The favourable mix of healthy growth and limited inflationary pressure bodes well for
Chinese commodities demand in 2011. But with commodity prices on the rise and
notably copper hitting all-time highs lately, China is looking to secure future access to
raw materials without having to be at the mercy of other countries. Last year, a range of
incidents were seen with China making attempts to take control of production facilities
for oil, steel and metals alike. More recently, China has cut export quotas for rare earth
materials (essential in a wide range of high- and green-tech products) considerably to
ensure own supplies going forward. Hence, also in 2011, the monthly Chinese customs
data on commodity imports should prove an important guide to the Chinese market
balance for different commodities, i.e. the extent to which domestic demand continues to
outpace own supplies for different products.
Construction activity could improve
again in early 2011
Source: EcoWin, Danske Markets.
Chinese growth 2011-12
Source: EcoWin, Danske Markets.
Inflation should start to ease in H2 11
Source: EcoWin, Danske Markets.
Chinese oil imports
Source: EcoWin, Danske Markets.
05 06 07 08 09 10
40
60
80
100
120
140
160
180
40
60
80
100
120
140
160
180
3M moving average
Construction indicator
Index
Iron ore import
Index
Projects under construction
07 08 09 10 11 12
2
4
6
8
10
12
14
16
-5
0
5
10
15
20
25
30
% q/q AR
<
GDP growth>>
03 04 05 06 07 08 09 10 11 12
-2
0
2
4
6
8
-2
0
2
4
6
8
Non-Food
Contribution to inflation % y/y
Forecast
% y/y
Food
12 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Theme #5: Physical-backed ETFs to
interact with the market balance
The introduction of physically-backed Exchange Traded commodity Funds (ETFs) has
been a major issue over the last couple of months in the base metal markets. We have
already seen ETF Securities introduce physically-backed ETFs. JP Morgan has
announced it will introduce physically-backed ETFs together with iShares. Rusal, the
world’s biggest aluminium producer is also expected to introduce an aluminium ETF.
Commodity ETFs based on futures have been available for several years. However, the
new ETFs are different. They are not backed by futures, but by physical commodities.
Hence, by definition they interact with the physical market balance contrary to traditional
ETFs that by definition only interfere with the futures market. In theory, physicallybacked
ETFs could be introduced in all kinds of commodities which have a reliable
market price. However, as the investor has to bear the costs to storage, insurance,
shrinkage etc, physically-backed ETFs have, or will to our knowledge, only be introduced
in base metals and precious metals. Many precious metal ETFs are backed by physical
assets today as the storage costs are very low. Hence, we focus here on the base metal
market.
Physically-backed ETFs to tighten market balances further
The impact on the physical market will depend on the popularity of the new instruments
and tightness of the market. The latter can be described by the size of the inventories and
the spare capacity in the single market. In this note we assume that the introduction of
physically-backed ETFs will not affect supply in the short term, as most base metal prices
are already well above marginal costs in the industry. Therefore, we focus on the
inventory situation.
Value of LME stocks are not impressive relative to potential investor flows
Warehouse
stock/m tonnes Price/USD
Value of stocks/
bn USD
Aluminium 4,277,050 2,485 10.63
Copper 377,550 9,700 3.66
Lead 208,275 2,568 0.53
Nickel 135,672 24,750 3.36
Tin 15,275 26,850 0.41
Zinc 701,425 2,448 1.72
Steel billet 56,485 575 0.03
Source: Bloomberg
Aluminium has the highest stock value well above USD10bn. However, it has to be noted
that a significant amount of aluminium is already tied up in financial deals, i.e. aluminium
sold at the forward price to take advantage of the contango structure in aluminium. The
independent researcher, CRU, estimated that last year up to 80% of the aluminium stored
in exchange-monitored warehouses was sold forward. Hence, even though aluminium
inventories look plentiful, physical ETFs could have a significant impact on aluminium
prices.
Key points
Physically-backed commodity
ETFs could be a potential game
changer for the base metal
market, as they interact with the
physical market balance contrary
to traditional ETFs which “only”
affect the futures market
The impact on the physical
market will depend on the
popularity of the new instruments
and tightness of the market.
Due to the significant storage and
insurance costs related to the
physical products the market
impact should not be
exaggerated. New regulation is
also likely if the new products gain
in popularity.
Aluminium attractive for physical
investors as forward curve is in
contango
Source: Ecowin
Chief Analyst
Arne Lohmann Rasmussen
+45 45 12 85 32
arr@danskebank.dk
13 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Copper is the second-largest base metal measured by the value of LME stocks. Copper
has some very strong fundamentals and is well known for its correlation with the global
business cycle and Asian growth. Hence for the investor looking for a sustained global
recovery, it is an obvious choice and we expect investors to continue buying heavily into
copper in 2011. Lead, nickel, tin and zinc are volatile metals and are not expected to
attract the same investor interest. However, the nominal values of the LME stocks are
quite small and it would only take modest investor interest in the smaller base metals to
have a significant impact on the physical market balance.
To put the value of the LME inventories into perspective, it can be noted that in the first
nine months of 2010, according to the World Gold Council, investors invested
USD12.9bn in gold ETFs and similar products. Hence if physical ETFs become popular,
they could potentially affect the base metal market strongly.
Fees for physical investors are not negligible
The advantage of physically-backed ETFs to traditional ETFs backed by an underlying
futures position depends on the forward structure and the costs of holding physical metal.
If the forward curve is upward sloping (contango) the physical investor avoids the
negative roll yield from the futures positions. This makes aluminium particularly
interesting for physical investments. If the market is downward sloping (backwardation)
the physical investor will miss the positive roll yield from the futures position.
The physical investor has to take into account the costs of holding physical metal. ETF
Securities charge different fees for their physically-backed products. First of all a
management fee, that is little different from the fee incurred when purchasing an ETF
based on futures. But on top of that the investor will have to pay insurance and storage
fees. According to ETF Securities the insurance allowance is 0.12% p.a. and the rental fee
36 cents/tonne/day or 1.4% p.a. for copper with the current price. Hence costs are 2.16%
p.a. including a management fee of 0.69%. However, the copper investor will also have to
take account of the foregone roll yield. Currently, the cash to 12-month spread in copper
is equivalent to 2.4%. Hence, total “costs” are above 4.5% p.a. for copper. In aluminium
the physical investor avoids a negative roll yield above 2%, but the storage fee, according
to ETF Securities, is as high as 6.54%.
The cost-benefit analysis underlines that if the curves stay unchanged going forward the
impact on the copper market might be smaller than the simple market-balance approach
indicates. The impact on the aluminium market should also not be exaggerated as the
storage costs, at least for now, are quite high relative to the “saved” roll yield.
Regulation to be tightened if prices get out of control
Physical ETFs would, if successful, interfere with the physical market balances. But for
now, regulatory authorities have been remarkably silent. In fact, it can be argued that
physical ETFs circumvent some of the current regulation regarding position limits in the
futures market. However, if physical ETFs actually do become popular, we are quite sure
that new regulations will emerge. In fact, physical ETFs could be used to interfere with
the futures market if one or more ETF owners were to suddenly hold a dominant share of
the physical market.
Overall, we conclude that physically-backed ETFs could be a potential game changer for
the base metal market. However, due to the fees associated with storage and insurance,
the impact should not be exaggerated not least for metals trading in backwardation.
However, the relative modest value of base metal inventories underlines that new investor
money could potentially interfere significantly with the physical market balance. One
almost certain consequence of physical ETFs is that volatility will continue to stay high or
even rise in the base metal market.
Copper to attract investors due to
strong fundamental case
Source: Ecowin
Storage costs for ETFs are high
Metal
Storage fee,
% p.a.
Aluminium 6.54
Copper 1.56
Lead 5.67
Nickel 0.75
Tin 0.61
Zinc 6.13
Source: ETF Securities prospectus
14 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Commodity-price forecasts
Energy, metals and grains
Source: Bloomberg, Danske Markets.
Oil crack spreads
Source: Bloomberg, Danske Markets.
2010 2011 2012 AVERAGE
05/01/11 10Q4 11Q1 11Q2 11Q3 11Q4 11Q1 11Q2 11Q3 11Q4 2010 2011 2012
NYMEX WTI 88.6 85 89 91 93 95 97 99 101 103 81 92 100
ICE Brent 92.9 87 92 93 94 96 98 100 102 104 81 94 101
Aluminium 2,465 2,365 2,475 2,500 2,525 2,550 2,575 2,600 2,625 2,650 2,202 2,513 2,613
Copper 9,475 8,613 9,500 9,800 9,800 9,800 10,000 10,100 10,200 10,300 7,562 9,725 10,150
Zinc 2,422 2,333 2,400 2,405 2,410 2,415 2,420 2,425 2,430 2,435 2,188 2,408 2,428
Nickel 24,779 23,619 25,000 25,500 26,000 26,500 26,750 27,000 27,250 27,500 21,915 25,750 27,125
Steel 570 518 560 570 580 590 595 600 605 610 488 575 603
Gold 1,384 1,370 1,400 1,425 1,450 1,475 1,450 1,425 1,400 1,375 1,226 1,438 1,413
Matif Mill Wheat (€/t) 251 225 250 240 230 220 220 220 220 220 171 235 220
CBOT Wheat (USd/bushel) 782 707 791 816 796 774 774 774 774 774 599 794 774
CBOT Corn (USd/bushel) 601 562 600 605 610 615 620 625 630 635 441 608 628
CBOT Soybeans (USd/bushel) 1,359 1,245 1,350 1,360 1,370 1,380 1,390 1,400 1,410 1,420 1,043 1,365 1,405
Agriculturals:
front month
Preciuos Metals:
spot (US$/oz)
Base metals:
LME 3M (US$/t)
Energy:
front month (US$/bbl)
Price forecasts AVERAGE
spot Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011 2012
ULSD 10ppm CIF NWE cargo (USD/MT) 810 766 809 822 839 859 873 888 903 917 697 832 895
ICE gasoil (USD/MT) 782 741 784 802 819 844 858 873 888 902 675 812 880
ICE Brent (USD/bbl) 95 87 92 93 94 96 98 100 102 104 81 94 101
3.5% fuel oil FOB ARA barge (USD/MT) 503 491 514 512 509 514 528 543 558 572 449 512 550
1.0% fuel oil FOB NWE cargo (USD/MT) 513 501 524 522 519 524 538 553 568 582 464 522 560
Crack spread forecasts AVERAGE
(USD/MT) spot Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011 2012
ULSD 10ppm CIF NWE cargo 110 125 135 140 150 155 155 155 155 155 100 145 155
ICE gasoil 82 100 110 120 130 140 140 140 140 140 78 125 140
3.5% fuel oil FOB ARA barge -197 -150 -160 -170 -180 -190 -190 -190 -190 -190 -148 -175 -190
1.0% fuel oil FOB NWE cargo -187 -140 -150 -160 -170 -180 -180 -180 -180 -180 -133 -165 -180
Brent (USD/MT) 700 641 674 682 689 704 718 733 748 762 597 687 740
2010 2011 2012
2010 2011 2012
15 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Commodities at Danske Markets
Commodities Research:
Arne Lohmann Rasmussen Chief Analyst, Head of FX and Commodities Research +45 45 12 85 32 arr@danskebank.dk
Christin Tuxen Senior Analyst, PhD +45 45 13 78 67 tux@danskebank.dk
Commodities Sales:
Martin Vorgod Senior Dealer (Denmark) +45 45 14 32 86 mavo@danskebank.dk
Fredrik Åberg Vice President (Denmark/Sweden) +45 45 14 32 85 faberg@danskebank.dk
Michael Winther Senior Dealer (Denmark) +45 45 14 67 67 miwin@danskebank.dk
Antti Malava Senior Dealer (Finland) +358 (0) 105462057 antt@danskebank.com
Anders Winnæss Senior Dealer (Norway) +47 23 13 91 57 awin@fokus.no
Patrick Aran Shawcross Senior Dealer (Northern Ireland) +44 (0) 28 9089 1111 psha@northernbank.co.uk
16 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Disclosure
This research report has been prepared by Danske Research, a division of Danske Bank A/S ("Danske Bank").
Analyst certification
Each research analyst responsible for the content of this research report certifies that the views expressed in the
research report accurately reflect the research analyst’s personal view about the financial instruments and issuers
covered by the research report. Each responsible research analyst further certifies that no part of the compensation
of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed
in the research report.
Regulation
Danske Bank is authorized and subject to regulation by the Danish Financial Supervisory Authority and is subject
to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske
Bank is subject to limited regulation by the Financial Services Authority (UK). Details on the extent of the
regulation by the Financial Services Authority are available from Danske Bank upon request.
The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts’
rules of ethics and the recommendations of the Danish Securities Dealers Association.
Conflicts of interest
Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high
quality research based on research objectivity and independence. These procedures are documented in the
research policies of Danske Bank. Employees within the Danske Bank Research Departments have been
instructed that any request that might impair the objectivity and independence of research shall be referred to the
Research Management and the Compliance Department. Danske Bank Research Departments are organised
independently from and do not report to other business areas within Danske Bank.
Research analysts are remunerated in part based on the over-all profitability of Danske Bank, which includes
investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate
finance or debt capital transactions.
Financial models and/or methodology used in this research report
Calculations and presentations in this research report are based on standard econometric tools and methodology
as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be
obtained from the authors upon request.
Risk warning
Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis
of relevant assumptions, are stated throughout the text.
First date of publication
Please see the front page of this research report for the first date of publication. Price-related data is calculated
using the closing price from the day before publication.
Disclaimer
General disclaimer
This research has been prepared by Danske Markets (a division of Danske Bank A/S). It is provided for
informational purposes only. It does not constitute or form part of, and shall under no circumstances be
considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments
(i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or
options, warrants, rights or other interests with respect to any such financial instruments) ("Relevant Financial
Instruments").
The research report has been prepared independently and solely on the basis of publicly available information
which Danske Bank considers to be reliable. Whilst reasonable care has been taken to ensure that its contents are
not untrue or misleading, no representation is made as to its accuracy or completeness, and Danske Bank, its
affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without
limitation any loss of profits, arising from reliance on this research report.
17 | 5 January 2011 www.danskeresearch.com
Commodities 2011
The opinions expressed herein are the opinions of the research analysts responsible for the research report and
reflect their judgment as of the date hereof. These opinions are subject to change, and Danske Bank does not
undertake to notify any recipient of this research report of any such change nor of any other changes related to the
information provided in the research report.
This research report is not intended for retail customers in the United Kingdom or the United States.
This research report is protected by copyright and is intended solely for the designated addressee. It may not be
reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank’s prior
written consent.
Disclaimer related to distribution in the United States
This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer
and subsidiary of Danske Bank, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S.
Securities and Exchange Commission. The research report is intended for distribution in the United States solely
to "U.S. institutional investors" as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this
research report in connection with distribution in the United States solely to “U.S. institutional investors”.
Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence
of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are
not registered or qualified as research analysts with the NYSE or FINRA, but satisfy the applicable requirements
of a non-U.S. jurisdiction.
Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial
Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in non-
U.S. financial instruments may entail certain risks. Financial instruments of non-U.S. issuers may not be
registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and
auditing standards of the U.S. Securities and Exchange Commission. ou
www.danskeresearch.com
Investment Research — General Market Conditions
In this outlook for commodities in 2011 we discuss five themes that we believe will drive
prices this year. We discuss the essence and implications of each theme below; we also
give an account of the themes outlined as key at the start of 2010. Finally, we provide
revised price forecasts for 2011 and introduce 2012 projections, see commodity-price
forecasts. Notably, we have revised our 2011 forecasts for oil a little higher, and our
projections for next year generally reflect our mildly bullish view on most products.
Some of the issues we pointed to as essential a year ago are still highly relevant. This
apply to the prospects for (further) tightening of market balances, and the potential for the
high correlations of commodities with other asset classes to (eventually) break down. Last
year, we also emphasised the potential for Asia to steer commodity-price developments
and the importance of the region has only grown larger since then. While both fiscal and
monetary policy tightening should be key themes in many countries for years to come,
this is already an central issue in e.g. China and will likely be crucial to commodity
markets this year as well.
Notwithstanding, new topics have surfaced in the past year. The likelihood of the
commodities super-cycle being resumed, and the potential importance of physicallybacked
base-metal ETFs (exchange-traded funds) currently being introduced are
significant developments in our view. But, regulatory changes in response to physical
ETFs and to speculative flows more generally cannot be ruled out. Crucially, we expect
the re-pricing of a commodities super-cycle to be a key theme across commodities and
FX markets in 2011. This is one reason why we expect commodity currencies to perform
well this year; see also FX Top Trades 2011.
Commodities super-cycle intact
Source: Eviews, EcoWin, Danske Markets. Note: the series “real commodity prices” here refers to the first
principal component extracted from the deflated crude oil, base metals and grains prices.
-6
-4
-2
0
2
4
6
1969 1979 1989 1999 2009
Common commodities factor (log real prices) "Super-cycle"
5 January 2011
Important disclosures and certifications are contained from page 16 of this report
Commodities 2011
Five themes to drive the markets this year
Outlook 2011
We outline five themes for
commodities in 2011:
Theme #1: Market balances to
tighten further, shifting forward
curves towards backwardation.
Theme #2: Pricing of a restart of
a decade-long commodities
“super-cycle” on top of businesscycle
fluctuations.
Theme #3: Risk of commodities
decoupling from the dollar – not
least if euro debt woes continue.
Theme #4: Degree and pace of
policy tightening in emerging
markets on both the monetary
and fiscal side.
Theme #5: Introduction of new
physically-backed base-metal
ETFs and regulatory responses.
We have revised our 2011
forecasts for oil a little higher and
introduce mildly bullish 2012
projections for most products.
Chief Analyst
Arne Lohmann Rasmussen
+45 4521 8532
arr@danskebank.dk
Senior Analyst
Christin Tuxen
+45 4513 7867
tux@danskebank.dk
Bloomberg: DRFX
2 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Review of 2010 themes
In January 2010, we highlighted that commodity markets would likely see increasing
focus on the supply side having been driven almost solely by the business cycle in 2009.
Production constraints have clearly surfaced over the past year but economic growth has
continued to be a key driver as well.
Theme #1: Correlations to fade
At the start of last year, we thought that the high correlations between commodity prices
and for example, EUR/USD and equities were set to fade in 2010 as focus seemed likely
to increasingly turn to individual-specific fundamentals for different products. Although a
clear co-movement of commodities and the dollar has broken down for prolonged periods
of time, the relationship between commodities and equities (risk sentiment) has remained
largely intact. The latter implies that investors remain wary of adding (further)
commodity exposure to their portfolios as the diversification benefits now look more
limited than prior to the recession. The fact that a range of commodity markets are now in
(or closer to) backwardation could lure investors going forward, however, as roll yields
turn positive.
Theme #2: No new all-time highs soon
In light of the large stock overhang in place for most raw materials at the start of 2010
and due to the risk of a negative feedback loop with growth, we predicted that new price
records were unlikely to be seen in most commodities in the near future. We did,
however, give two exceptions to this call for gold and copper – indeed, these two metals
have hit new all-time highs this year on the outlook for low interest rates for an extended
period and waning mine supply, respectively.
Theme #3: OPEC still in charge
A year ago, we saw OPEC keeping production broadly unchanged during 2010 in order to
let rising demand work off booming inventories and thus help to stabilise prices. While
output quotas have indeed been kept at end-2008 levels, members’ compliance edged
lower still until the summer. Forward-demand cover for the OECD region has been
stubbornly high as a result, hovering around a lofty 60 days. However, a firm recovery in
OECD demand and expectations of continued vigorous growth in emerging markets have
contributed to a relatively steady market with prices range trading for most of the year.
Yearly changes
Source: Bloomberg, Danske Markets.
Commodities movements in 2010
Source: EcoWin, Danske Markets.
Correlations with oil
Source: EcoWin, Danske Markets.
Gold and copper
Source: EcoWin, Danske Markets.
0 50 100
ICE Brent
API2 coal
Aluminium
Copper
Gold
LIFFE Wheat
% y/y
3 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Theme #4: Flatter curves in sight
The tightening in market balances from both the demand and supply side that we outlined
as a theme for 2010 – and to extend into 2011 – has led forward curves for a range of
products to see clear shifts in levels and slopes alike. Curve flattening has been seen in a
range of markets but most recently so for crude oil where the Brent forward curve is now
broadly flat after having been in contango since the onset of the financial crisis. However,
it is noteworthy that in spring, during the massive sell-off in both the energy and the
metals complex, the oil forward curve in fact shifted into a steep contango as the
Macondo oil spill simultaneously prompted fears over long-term supply. The grains
markets also saw periods of backwardation as adverse weather tightening spot markets
significantly.
Theme #5 Asia to put a solid floor under prices
Finally, we stressed that Asian appetite for commodities would continue to put a solid
floor under prices. While fears over policy tightening in China have spooked commodity
markets every now and again, the Chinese remain key on the demand side for most
products. This is notably clear from the ever-growing attention paid to China’s monthly
commodity import data; in 2010, the market has been taken aback by the continued
strength in copper purchases and by the surge in demand for corn and soybeans. In
contrast, Japanese growth has come in weaker than anticipated and the floor under prices
that we forecast last year has been provided chiefly by the rest of Asia with notably India
an emerging player.
And the unforeseen: weather events!
One of the things that surprised us the most in 2010 was the significant impact of adverse
weather on the agricultural complex. This spurred a rally in grain prices in H2, which
took our relatively bearish call aback. Stocks-to-use ratios declined to less comfortable
levels and we expect to see the lower buffer stocks cause volatility in grains to remain
high in the near term. In the longer term, the recent experience highlights that the impact
on production conditions for a range of commodities from a changing climate with more
extreme weather events as a result is set to be a crucial factor.
Matif milling wheat forward curve
Source: EcoWin, Danske Markets.
Chinese imports of copper
Source: EcoWin, Danske Markets.
4 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Theme #1: Tighter market balances
Heavy market surpluses were seen in most commodity markets in the wake of the global
recession in 2009 as demand fell well below production. In 2010, deficits began to reemerge
– first in copper and more recently in the oil market. We expect to see a more
widespread pattern of tighter market balances in 2011.
Market balances to tighten further
On the demand side of the equation, the fact that our economists now view the global
recovery as being ‘back on track’ after double-dip worries in mid-2010 (see Global
Scenarios, December 2010) suggests that consumption of raw materials should continue
to prove healthy. US and German data has surprised on the upside in recent months, and
even the weak spot during the upturn – Japan – has been showing signs of stronger than
previously projected economic activity. Asia is still going strong, and our economists see
the apparent frontloading of policy rate hikes in China as positive in reducing the
likelihood of more aggressive tightening measures and a harder landing at a later stage,
see Theme #4.
Supply-side issues are also surfacing in key markets. Although these problems may partly
be caused by a setback in capital spending during the credit crunch, we believe capacity
constraints are for now more structural than cyclical in nature; see Theme #2. In short,
mine supply is struggling to expand in copper and nickel – the announcement of mining
super taxes in both Australia and China will only add to the costs associated with
production expansion in the sector. Even in the aluminium industry where smelting
capacity is ample, costs are picking up in the form of both input (bauxite/alumina) and
energy, thus supporting output prices. Finally, oil majors are facing an increasingly
uncertain environment on the supply side as the prospects of expanding output in non-
OPEC countries are growing bleaker – the Macondo oil spill is likely to increase safety
standards and insurance premia for deepwater drilling.
On balance, we think inventories are set for further draws this year. We expect the crude
oil, copper, nickel and corn/maize markets to experience deficits for 2011 as a whole.
Buffers as measured by stocks-to-consumption levels are thus set to decline significantly.
Specifically, we look for OECD forward-demand cover of oil products to decline from
currently 60 days to around 57 days; this would still be an elevated level compared with
the 52-54 days historically preferred by OPEC. As a result, we believe that OPEC will
keep production close to current levels; indeed, the cartel still seems wary of the
sustainability of the global recovery in energy demand.
Base metals weeks of consumption Grains stocks-to-use
Source: CRU, Danske Markets. Source: USDA; Danske Markets.
0
5
10
15
20
25
Copper Aluminium
Hist avg (weeks) 2010 2011 (Danske)
0
5
10
15
20
25
30
35
Wheat Corn
Hist avg (%) 2010 2011 (Danske)
Key points
We expect 2011 to give way to
further tightening of market
balances in oil and metals
Forward curves should eventually
shift into backwardation, offering
opportunities for both consumer
hedging and investors
LME metal stocks
Source: EcoWin, Danske Markets
Crude oil forward-demand cover
Source: IEA, Danske Markets
Senior Analyst
Christin Tuxen
+45 4513 7867
tux@danskebank.dk
47
49
51
53
55
57
59
61
63
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
mean
2005-2009
days
2010
Min/max 2005-2009
2009
5 | 5 January 2011 www.danskeresearch.com
Commodities 2011
In base metals, the copper stocks-to-consumption ratio is currently running at a mere 2.3
weeks – i.e. below the historical average of 3 weeks; we look for a drop to below 2 weeks
this year. In aluminium, the buffer is traditionally higher but the market is at present well
above ‘normal’ levels with stocks available to cover almost 24 weeks of demand; we see
a small drop close to 20 weeks in 2011. For grains, stocks-to-use ratios dropped sharply
in 2010 and corn inventories are now at 16% (of annual world use) – i.e. markedly
outside the 20-40% range which is usually considered a balanced market; we look for a
further decline in 2011 to 12%. Wheat is also approaching less comfortable levels but we
see a broadly balanced market this year as new plantings have increased on the back of
production shortfalls over the past season; stocks-to-use seen stable at around 30%.
Backwardation to lure investor flows
Tighter market balances will most likely affect forward curves. Last year we saw the
crude oil forward curve shift from a pronounced contango form to now being almost flat.
We expect to see the crude curve shifting into a more marked backwardation during the
course of the year. Overall, we see the oil market recovery as taking place in three stages:
off-shore/floating storage being run down (2009/10), on-shore stocks declining (2010/11),
and finally, OPEC spare capacity shrinking (2011/12). Refined oil curves are still in
contango for most products but lighter oil could see curve flattening as industrial activity
continues to add to demand. But, the refining sector is currently seeing a good deal of
capacity additions which should cap price pressure in the front end.
The historically close relationship between US days of supply and the near-term slope
broke down to some extent in 2010. There are good arguments as to why the comovement
may be less pronounced going forward: the market is increasingly behaving in
a forward-looking manner, thus reacting more to expected future tightness and less to
present conditions. Also, the importance of the US in terms of global oil use is declining –
instead Asian market balances will probably prove decisive going forward.
The copper market was one of the first commodity markets to shift into backwardation
after the crisis led to a front-end sell-off in late 2008. LME 3M copper prices have
recently reached new record highs as not least construction activity is starting to gain pace
and a range of mines are struggling with e.g. labour disputes, dragging LME stocks lower.
We think the curve will remain downward-sloping throughout 2011 but developments
further out the curve will depend much on whether new mine projects are announced.
In aluminium, consumption was quick to recover after the recession but LME stocks
merely stabilised in 2010. This kept the aluminium forward curve in contango and
ensured that the widespread business of buying metal spot and selling it forward to lock
in the contango difference (minus funding and storage costs) has continued to be
profitable. Financial deals activity has not led to a marked flattening of the curve but
affect the physical market by tying up a large amount of metal. With interest rates set to
stay low for most of 2011, there is little on the funding side to destroy the party. But, as
yields could pick up towards year-end, financial deals could be unwound (or simply not
rolled over), thereby releasing a lot of aluminium. This could cause downward pressure
on prices. Physically backed base metal ETFs (exchange-traded funds) have the potential
to tighten the aluminium market significantly however, see Theme #5.
All in all, we expect further tightening of market balances in oil and metals markets this
year. For consumers, this is essential because in a backwardation market it is possible to
lock in expenses below the prevailing spot price. From an investor point of view, this is
also crucial as the roll yield obtained from traditional index/futures investment becomes
positive when the curve is downward-sloping. As a result, we expect to see investor
inflows into commodities grow further.
Brent forward curve
Source: EcoWin, Danske Markets.
Crude fwd curve and US days of supply
Source: EcoWin, Danske Markets.
Copper forward curve
Source: EcoWin, Danske Markets.
Commodities speculative flows
Source: BarCap, Danske Markets.
0
10
20
30
40
50
60
70
80 Inflows (bn USD)
6 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Theme #2: Super-cycle resumed
The cyclical rebound in demand (see Theme #1) is, in our view, only one factor set to
drive commodities higher in 2011: we believe the market will soon begin to price a restart
of the so-called “commodities super-cycle” which could remain in place for decades
irrespective of the regular business cycle fluctuations. The notion of a commodities supercycle
– i.e. the idea that scarcity of raw materials combine with rising demand from
emerging economies to drive a cycle that supersedes the ordinary business cycle – is in
our view about to be reignited after having been put on hold during the financial crisis.
Demand and supply factors create “perfect storm”
In terms of demand, activity in Asia has recovered strongly and metals consumption,
within notably the construction sector, is once again on the rise. In addition, the largescale
Chinese infrastructure projects implemented as part of the fiscal stimuli in wake of
the recession are unlikely to mark an end to the country’s need for metals. China is set to
expand, for example, its rail network and power grid extensively going forward. During
2010, China took over the US as the world’s number one energy consumer and together
with an ongoing urbanisation process across emerging markets, this underlines structural
changes likely to support demand for raw materials going forward.
On the supply side, the metals market is increasingly focused on output problems
resulting from falling ore grades and a lack of new mine projects coming on stream. In
particular, the copper market has entered what appears to be a structural stance of deficits
as production is stalling. At the same time, costs are on the rise in the mining sector as a
result of higher mining taxes in key countries and ongoing labour disputes.
In energy markets, the oil spill in the US Gulf of Mexico has fuelled worries over future
restrictions and/or costs associated with deepwater oil drilling. A structural decline in
North-Sea production is just one other factor behind falling non-OPEC oil production.
Notably, the world is set to become increasingly dependent on OPEC for supplies going
forward, but whether Iraqi production can be raised as quickly and cost-effectively as
planned is subject to great uncertainty. However, bright spots from a supply point of view
are advances in natural-gas extraction (e.g. horizontal drilling) and transportation (in the
form of liquefied natural gas, LNG). Indeed, the current “gas glut” could persist for years.
At the same time, extreme weather events resulting from a changing climate worldwide
are likely to continue to affect the agricultural sector in particular – 2010 showed that
adverse weather conditions in key growing regions (e.g. droughts in Russia, flooding in
Pakistan, etc) have the potential to exert massive impact on grain prices as the sector
operates with little spare capacity.
Key points
On top of support from the
business cycle, commodities will
likely receive tailwinds for years
to come from a re-start of the socalled
“commodities super-cycle”.
We believe the market will soon
start to price a re-ignition of a
super-cycle – i.e. the idea that
rising demand for raw materials
from emerging markets couple
with supply constraints to drive
prices higher for an extended
period of time.
Real commodity prices: trend intact
Source: EcoWin, Danske Markets.
Non-OPEC oil supply
Source: IEA, Danske Markets.
Senior Analyst
Christin Tuxen
+45 4513 7867
tux@danskebank.dk
Copper market balance: deficits becoming structural
Source: WBMS, Danske Markets.
Metals cycle
-500000
-400000
-300000
-200000
-100000
0
100000
200000
0
500
1000
1500
2000
1999 2001 2003 2005 2007 2009
1000 tonnes
Consumption Production Market balance (RHS)
Al (log real price)
7 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Super-cycle intact despite crisis
In order to gauge whether the 2008/09 recession led to a break in a commodities supercycle
we, first identify a common factor (in statistical terms, the first principal
component) among real prices for a wide range of commodities, including crude oil, base
metals and grains. All series are annual, in logs, and deflated by US consumer prices. We
then separate the cyclical and non-cyclical component (using a band-pass filter) of the
common factor in order to disentangle the impact of a super-cycle (low frequency) from
the regular business cycle (higher frequency).
Results are similar across oil, metals and grains: in all cases the most recent trough was
observed around the start of the millennium and there are no signs of a cyclical peak
having been reached as a result of the recession. Within the grains complex (wheat, corn,
and soybeans) the common factor explains 97% of the variation in the data; for metals
(copper, aluminium, nickel, zinc, lead, and tin) the corresponding figure is 70% which is
still rather high. When all commodity prices are considered, the common factor accounts
for 68% of the variation. Hence, the apparent super-cycle component on average explains
more than 2/3 of movements seen in real commodity prices over the period from 1969 to
2009.
The difference between the common factor and its super-cycle component highlights that
the 2008/09 sell-off in commodities was merely a business-cycle phenomenon and thus
that this did not mark an end to a broader price upturn. It is also evident from the analysis
that the previous cycle peak was witnessed in the late-1970s around the first oil crisis –
for a long time thereafter commodity prices fell in real terms. Our results are broadly
similar to those presented by the IMF in the World Economic Outlook, October 2010.
Commodities super-cycle intact
Source: Eviews, EcoWin, Danske Markets. Note: the series “real commodity prices” here refers to the first
principal component extracted from the deflated crude oil, base metals and grains prices.
However, we are not uncritical of the super-cycle theory. There is a risk that world
demand for raw materials could suffer from an extended period of below-trend growth.
Also, the supply response to higher prices may be quicker this time compared with
previously due to technological advances. Moreover, in the event that some markets
tighten more than others and to the extent that technology allows, substitution effects may
kick in as well. For example, surging copper prices may lead some manufacturers to
replace the red metal with aluminium if possible, and soaring oil/coal prices may induce
power stations to shift feedstock toward natural gas instead.
Overall, evidence is in our view in favour the idea that the crisis merely posed a pause to
a commodities super-cycle which is still intact. We believe that the market has not yet
priced in the likelihood of this “perfect storm” for commodities but will soon start to do
so. The existence of a super-cycle suggests that the balance of risks for notably metals
and energy prices could lie persistently on the upside for years to come.
-6
-4
-2
0
2
4
6
1969 1979 1989 1999 2009
Common commodities factor (log real prices) "Super-cycle"
Grains cycle
Source: Eviews, EcoWin, Danske Markets.
Business-cycle induced price
movements in real commodity prices
Source: Eviews, EcoWin, Danske Markets.
-5
0
5
0
1
2
3
1969 1984 1999
Corn (log real price)
Soybeans
Wheat
Grains super-cycle
-3
-2
-1
0
1
2
3
1969 1979 1989 1999 2009
Business cycle component
8 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Theme 3: Risk of dollar decoupling
Correlations of commodities with EUR/USD and equities remained at elevated levels for
most of 2010. Risk sentiment was a key driver in daily price movements for most of the
year but temporary decoupling of commodities from the dollar was seen. As double-dip
fears were eventually sidelined on a healthy growth outlook for Asia, the US and core
EMU countries’ commodities continued to head higher. Meanwhile, a risk premium on
the single currency led EUR/USD lower as peripheral-debt fears remained in place.
Look for declining correlation of commodities and the dollar
In 2011 we foresee that risk appetite will continue to be a crucial factor in steering
sentiment in the commodity markets. In contrast, we expect this year to see the
correlation between commodities and the dollar fluctuate a lot and likely decline
somewhat; this highlights the risk associated with relying on a high correlation to provide
an implicit hedge of price risk for a EUR-based consumer/producer. Two scenarios based
on a declining correlation are important to consider from a hedging point of view.
Base scenario: commodities stall as EUR/USD risk premium is priced out
As our economists remain complacent that the euro debt crisis will be contained, the risk
premium attached to the euro at present should gradually start to be priced out. Indeed,
our FX strategists are looking for EUR/USD to rise from the current 1.33 to 1.50 in 12
months. In this process we could see the euro go higher without this giving broad-based
support to dollar-denominated commodity prices, as the latter recently appear to have run
ahead of the currency pair. This scenario – stalling commodity prices combined with
EUR/USD appreciation - should provide attractive hedging opportunities for consumers
as it would offer relatively low commodity prices measured in euros. For producers or
hedgers of inventories, this would be an unfortunate scenario however.
Alternative scenario: commodities surge on global growth outlook but
EUR/USD drops on renewed euro debt fears
An important alternative scenario to consider is the event that debt woes continue to
weigh on the euro whereas strong US growth - not least if employment takes off –
supports the dollar. If EUR/USD is dragged down further as a result, commodities could
nonetheless soar ahead on improving demand prospects. This scenario – rising
commodity prices coupled with EUR/USD depreciation – could be poisonous for EURbased
consumers. On the other hand, clients looking to sell/hedge inventories would
benefit from attractive prices converted into EUR.
In order to illustrate the potential risk associated with relying on a high correlation
between oil and EUR/USD, we do as follows. We first calculate the Brent oil forward
curve in EUR per barrel at the current level of correlation along with the probability
bands implied by option pricing. We then compare this with the implicit forward curve
when the correlation between oil and EUR/USD is set to the minimum level observed
since the year 2000. If oil and EUR/USD moved one-for-one the implicit hedge for a
EUR-based client would be a perfect one as the EUR price would be constant. However,
as illustrated by the charts, the fact that the correlation is imperfect and periodically weak
implies that the implicit risk for a EUR-based consumer may be much larger than the
most recent experience would suggest. As is evident from a comparison of the two 90%
confidence ranges (see charts next page), a decline in the oil-dollar correlation would
significantly increase the sample space for commodity prices measured in euros.
Key points
We expect the correlation of
commodities with equities (risk
appetite) to remain high, but we
highlight that hedging clients
should prepare for some degree
of dollar decoupling in 2011.
As a result, we advise against
relying on EUR/USD movements
to provide an implicit hedge
against commodity-price
fluctuations and we suggest fixing
prices in one’s local currency.
Correlation of oil with EUR/USD and
equities
Source: EcoWin, Danske Markets.
Commodity prices in EUR terms
Source: EcoWin, Danske Markets.
Senior Analyst
Kasper Kirkegaard
+45 45 13 70 18
kaki@danskebank.com
Senior Analyst
Christin Tuxen
+45 4513 78 67
tux@danskebank.dk
9 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Oil in EUR at current USD correlation
Oil in EUR at historical low USD
correlation
Source: Bloomberg, EcoWIn, Danske Markets. Source: Bloomberg, EcoWIn, Danske Markets.
Oil, dollar, risk, inventories, and speculative flows
The high correlation between commodities and the dollar may however derive from the
fact that both are likely to be driven by risk appetite, i.e. improvements in risk sentiment
have a tendency to lead both commodities and EUR/USD higher. In order to investigate
this hypothesis we conduct the following exercise. We first estimate the relationship
between EUR/USD and the oil price and then add equity returns (as a proxy for risk
appetite) and then in turn augment with US inventories and speculative positioning to see
how causal effects of the different variables on oil might change. All data series are taken
to run from the year 2000.
A bivariate model of Brent oil and EUR/USD suggests that there is both a long- and
short-term relation between the two variables and that notably EUR/USD appears to lead
oil rather than the other way around. However, when adding risk appetite as measured by
S&P 500 returns to the model, it becomes evident that movements in equity markets are
potentially more crucial in driving oil prices than the dollar. Brent oil is in the longer run
driven both by EUR/USD and equity returns and as such there is a stationary long-run
relation between the three variables which sees oil prices adjusting in an error-correcting
fashion whenever disequilibria occur. From causality tests, it is clear, however, that in the
short term equity markets drive both EUR/USD and oil prices whereas there is no clear
direct link between EUR/USD and oil once risk sentiment is controlled for.
Importantly, if we take changes in US crude oil inventories into account – usually seen as
a key driver of oil-market fundamentals - the oil price is on a weekly basis largely driven
by changes in stock levels rather than by risk or the dollar. Finally, when adding
speculative positioning we find that there is a borderline significant relation between noncommercial
net long positions in oil at NYMEX and the price. However, causality tests
reveal that in the short run there is a tendency for price rises to precede increases in
investor flows. In other words, there are no clear signs from this model that speculators
have a marked direct effect on prices when other factors (risk, EUR/USD and inventories)
are controlled for. Thus, it appears that speculative flows to large extent chase price rises
rather than the other way around.
Take care when “hedging” commodities via the dollar
In light of the above, we advise clients against relying on a close correlation between
commodity prices and the dollar. Historically, the simple correlation is highly unstable
and the apparent co-movement seems to be driven largely by shifts in a third factor, risk
appetite. Thus, a direct relationship between EUR/USD and commodities is not given by
nature. Crucially, if global risk appetite remains intact but market sentiment towards
Euroland continues to sour, then “risk” would likely be supportive for commodities while
negative for the single currency. The possibility of dollar decoupling is thus a central risk
to the factor in deciding on one’s hedging strategy.
Causality test (daily bivariate model)
p-value
EUR/USD --> Oil 0.09
Oil --> EUR/USD 0.62
Source: Eviews, Danske Markets. Note: a p-value
below 0.05 indicates significant effect at a 5%
probability level.
Causality tests (daily 3D model)
p-value
EUR/USD --> Oil 0.12
S&P500 --> Oil 0
Oil --> EUR/USD 0.49
S&P500 --> EUR/USD 0
Oil --> S&P500 0.28
EUR/USD --> S&P500 0.23
Source: Eviews, Danske Markets.
Causality tests (weekly 4D model)
p-value
EUR/USD --> Oil 0.81
S&P500 --> Oil 0.04
Stocks --> Oil 0.02
Spec flows --> Oil 0.46
Oil --> EUR/USD 0.37
S&P500--> EUR/USD 0.18
Stocks--> EUR/USD 0.25
Spec flows --> EUR/USD 0.07
Oil --> S&P500 0.53
EUR/USD --> S&P500 0.61
Stocks --> S&P500 0.37
Spec flows --> S&P500 0.62
Oil --> Stocks 0.75
EUR/USD --> Stocks 0.8
S&P500 --> Stocks 0.85
Spec flows --> Stocks 0.2
Oil --> Spec flows 0
EUR/USD --> Spec flows 0.09
S&P500--> Spec flows 0.46
Stocks--> Spec flows 0.13
Source: Eviews, Danske Markets.
10 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Theme 4: Chinese policy tightening
In 2011 the developed world will see governments focusing on reducing budget deficits
and central banks preparing exits from (near) zero interest rate policies. Meanwhile, the
focal point in emerging markets will be reining in credit growth while fiscal policy could
remain relatively loose in order to accommodate structural needs for investment in e.g.
infrastructure. Although other Asian countries such as India are growing in importance,
China remains the central consumer in the developing world and we outline its 2011
policy outlook below.
Monetary policy: tightening but not aggressively so
The People’s Bank of China (PBOC) is set to conduct a minor shift in policy from being
accommodative to being ‘prudent’ – in Chinese terminology this usually means neutral.
Following the Christmas Day rate hike, our economists now look for higher policy rates
to be frontloaded into H1 where growth is expected to be strong and inflationary pressure
most severe. The Chinese authorities will probably continue to use a combination of
higher reserve requirements, yuan appreciation, and constraints on credit growth in order
to curb inflationary pressure. The latter tool should be particularly effective in dealing
with the booming property market which is still a key concern. Although no target for
credit growth has been announced yet, it will probably only see a modest decline. Also,
even if China raises interest rates as expected, a real one-year deposit rate will still be
negative.
Despite higher interest rates, the impact from monetary policy on growth could actually
be positive in early 2011. This is because the considerable focus on the part of
policymakers and banks on achieving the annual targets for credit led to relatively tight
credit conditions towards the end of 2010. During Q1, banks should thus again have
ample room to expand loans. This could boost investment demand and imply a strong
start to industrial activity in the new year.
Overall, commodities are thus unlikely to be severely constrained from the monetary side
when it comes to China in 2011. On impact, news of tighter policy measures could still
spur sell-offs in particularly base metals, but in the longer term we think that measures
that limit the risk of a hard landing for the economy will eventually be perceived as
positive by the market. Recent hints that China will use a stronger CNY to rebalance the
economy are also positive for cycle-sensitive commodities as this will increase the
likelihood of longer-term growth sustainability. Gold may suffer from fading risks of a
global currency war though as safe-haven flows should wane.
Fiscal policy: softening impact from lower infrastructure
spending
One of the key factors lifting China out of the financial crisis was the implementation of
massive fiscal stimuli in 2009 and 2010. The programme, which notably involves a
significant amount of spending on infrastructure, was set to run out in 2011 but it now
appears that the government will attempt to soften the negative impact. Policymakers
have maintained the phrase ‘proactive’ to describe fiscal policy – in Chinese terminology
this usually means expansive fiscal policy.
Key points
Policy tightening on both the
fiscal and monetary side will be
vital in most countries in 2011
but Asian developments are likely
to play a key role for rawmaterials
demand.
Commodities will likely be
spooked by news of excess
liquidity being withdrawn but
fiscal policy is set to remain
relatively expansive in China and
thus to give broad-based price
support.
Investment demand often strong early
in the year due to credit targets
Source: EcoWin, Danske Markets.
Negative real deposit rates can feed
asset bubbles
Source: EcoWin, Danske Markets.
Senior Analyst
Flemming J. Nielsen
+45 45128535
flemm@danskebank.dk
Senior Analyst
Christin Tuxen
+45 4513 7867
tux@danskebank.dk
05 06 07 08 09 10
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
-2
0
2
4
6
8
10
12
% 3m/3m
<
% 3m/3m
99 00 01 02 03 04 05 06 07 08 09 10
-6
-4
-2
0
2
4
6
-4 8
-2
0
2
4
6
8
10
12 %-point
Real interest rate, 2-year deposit>>
<< House prices
% y/y
11 | 5 January 2011 www.danskeresearch.com
Commodities 2011
To offset the negative impact from lower infrastructure spending in 2011, the Chinese
government is planning to boost construction of social housing. This implies that the
construction of social housing may be almost doubled this year to 10m units from 5.8m in
2010. In addition, investments will be boosted to support the government’s effort to
improve energy efficiency and environmental protection. On the negative side, however,
the government has simultaneously announced an abolishment of subsidies for auto
purchases from 1 January 2011. This could weigh on auto sales going forward after
strong performance in past years.
All in all, the negative impact on metals demand from infrastructure programmes running
out is set to be smaller than feared, although it could still have some negative
consequences for base metals and energy in 2011. Still, ongoing structural developments
related to the ongoing urbanisation process and adaptation of a Western lifestyle mean
that demand for raw materials should stay strong despite tighter fiscal policy; see also
Theme 2 on the existence/impact of a commodities super-cycle.
‘Goldilocks’ outlook on track but risk of hard landing has risen
Taken together, the above-mentioned factors point to an acceleration of Chinese growth
in H1, driven mainly by stronger investment demand, recovering exports and some
restocking following inventory cuts in Q2 and Q3 last year. Rate hikes are unlikely to
have much impact in the near term. We see Chinese GDP growth entering double-digit
territory in H1 and hence exceed long-run sustainable levels.
We expect inflation to accelerate again soon thereafter and to stay above 5% y/y into Q2.
In H2, we forecast that GDP growth will slow to below potential on the back of monetary
tightening. But, it should prove a soft landing as PBOC will eventually pause the
tightening cycle. Indeed, it is crucial that Chinese inflation has so far mainly been driven
by higher food prices. In the absence of negative disturbances to the supply of agricultural
commodities, inflation is poised to ease substantially in H2.
Nevertheless, there is a substantial risk that the slowdown after the summer could be
more severe than our base scenario. This would be the case if inflation increases more
than our forecast and thus forces PBOC to tighten monetary policy more aggressively.
This could be triggered by further price increases, e.g. for grains. This will in turn depend
largely on the weather at key stages in the crop-growing cycle in the relevant countries.
Chinese demand benign for commodities but keep eye on supply
The favourable mix of healthy growth and limited inflationary pressure bodes well for
Chinese commodities demand in 2011. But with commodity prices on the rise and
notably copper hitting all-time highs lately, China is looking to secure future access to
raw materials without having to be at the mercy of other countries. Last year, a range of
incidents were seen with China making attempts to take control of production facilities
for oil, steel and metals alike. More recently, China has cut export quotas for rare earth
materials (essential in a wide range of high- and green-tech products) considerably to
ensure own supplies going forward. Hence, also in 2011, the monthly Chinese customs
data on commodity imports should prove an important guide to the Chinese market
balance for different commodities, i.e. the extent to which domestic demand continues to
outpace own supplies for different products.
Construction activity could improve
again in early 2011
Source: EcoWin, Danske Markets.
Chinese growth 2011-12
Source: EcoWin, Danske Markets.
Inflation should start to ease in H2 11
Source: EcoWin, Danske Markets.
Chinese oil imports
Source: EcoWin, Danske Markets.
05 06 07 08 09 10
40
60
80
100
120
140
160
180
40
60
80
100
120
140
160
180
3M moving average
Construction indicator
Index
Iron ore import
Index
Projects under construction
07 08 09 10 11 12
2
4
6
8
10
12
14
16
-5
0
5
10
15
20
25
30
% q/q AR
<
GDP growth>>
03 04 05 06 07 08 09 10 11 12
-2
0
2
4
6
8
-2
0
2
4
6
8
Non-Food
Contribution to inflation % y/y
Forecast
% y/y
Food
12 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Theme #5: Physical-backed ETFs to
interact with the market balance
The introduction of physically-backed Exchange Traded commodity Funds (ETFs) has
been a major issue over the last couple of months in the base metal markets. We have
already seen ETF Securities introduce physically-backed ETFs. JP Morgan has
announced it will introduce physically-backed ETFs together with iShares. Rusal, the
world’s biggest aluminium producer is also expected to introduce an aluminium ETF.
Commodity ETFs based on futures have been available for several years. However, the
new ETFs are different. They are not backed by futures, but by physical commodities.
Hence, by definition they interact with the physical market balance contrary to traditional
ETFs that by definition only interfere with the futures market. In theory, physicallybacked
ETFs could be introduced in all kinds of commodities which have a reliable
market price. However, as the investor has to bear the costs to storage, insurance,
shrinkage etc, physically-backed ETFs have, or will to our knowledge, only be introduced
in base metals and precious metals. Many precious metal ETFs are backed by physical
assets today as the storage costs are very low. Hence, we focus here on the base metal
market.
Physically-backed ETFs to tighten market balances further
The impact on the physical market will depend on the popularity of the new instruments
and tightness of the market. The latter can be described by the size of the inventories and
the spare capacity in the single market. In this note we assume that the introduction of
physically-backed ETFs will not affect supply in the short term, as most base metal prices
are already well above marginal costs in the industry. Therefore, we focus on the
inventory situation.
Value of LME stocks are not impressive relative to potential investor flows
Warehouse
stock/m tonnes Price/USD
Value of stocks/
bn USD
Aluminium 4,277,050 2,485 10.63
Copper 377,550 9,700 3.66
Lead 208,275 2,568 0.53
Nickel 135,672 24,750 3.36
Tin 15,275 26,850 0.41
Zinc 701,425 2,448 1.72
Steel billet 56,485 575 0.03
Source: Bloomberg
Aluminium has the highest stock value well above USD10bn. However, it has to be noted
that a significant amount of aluminium is already tied up in financial deals, i.e. aluminium
sold at the forward price to take advantage of the contango structure in aluminium. The
independent researcher, CRU, estimated that last year up to 80% of the aluminium stored
in exchange-monitored warehouses was sold forward. Hence, even though aluminium
inventories look plentiful, physical ETFs could have a significant impact on aluminium
prices.
Key points
Physically-backed commodity
ETFs could be a potential game
changer for the base metal
market, as they interact with the
physical market balance contrary
to traditional ETFs which “only”
affect the futures market
The impact on the physical
market will depend on the
popularity of the new instruments
and tightness of the market.
Due to the significant storage and
insurance costs related to the
physical products the market
impact should not be
exaggerated. New regulation is
also likely if the new products gain
in popularity.
Aluminium attractive for physical
investors as forward curve is in
contango
Source: Ecowin
Chief Analyst
Arne Lohmann Rasmussen
+45 45 12 85 32
arr@danskebank.dk
13 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Copper is the second-largest base metal measured by the value of LME stocks. Copper
has some very strong fundamentals and is well known for its correlation with the global
business cycle and Asian growth. Hence for the investor looking for a sustained global
recovery, it is an obvious choice and we expect investors to continue buying heavily into
copper in 2011. Lead, nickel, tin and zinc are volatile metals and are not expected to
attract the same investor interest. However, the nominal values of the LME stocks are
quite small and it would only take modest investor interest in the smaller base metals to
have a significant impact on the physical market balance.
To put the value of the LME inventories into perspective, it can be noted that in the first
nine months of 2010, according to the World Gold Council, investors invested
USD12.9bn in gold ETFs and similar products. Hence if physical ETFs become popular,
they could potentially affect the base metal market strongly.
Fees for physical investors are not negligible
The advantage of physically-backed ETFs to traditional ETFs backed by an underlying
futures position depends on the forward structure and the costs of holding physical metal.
If the forward curve is upward sloping (contango) the physical investor avoids the
negative roll yield from the futures positions. This makes aluminium particularly
interesting for physical investments. If the market is downward sloping (backwardation)
the physical investor will miss the positive roll yield from the futures position.
The physical investor has to take into account the costs of holding physical metal. ETF
Securities charge different fees for their physically-backed products. First of all a
management fee, that is little different from the fee incurred when purchasing an ETF
based on futures. But on top of that the investor will have to pay insurance and storage
fees. According to ETF Securities the insurance allowance is 0.12% p.a. and the rental fee
36 cents/tonne/day or 1.4% p.a. for copper with the current price. Hence costs are 2.16%
p.a. including a management fee of 0.69%. However, the copper investor will also have to
take account of the foregone roll yield. Currently, the cash to 12-month spread in copper
is equivalent to 2.4%. Hence, total “costs” are above 4.5% p.a. for copper. In aluminium
the physical investor avoids a negative roll yield above 2%, but the storage fee, according
to ETF Securities, is as high as 6.54%.
The cost-benefit analysis underlines that if the curves stay unchanged going forward the
impact on the copper market might be smaller than the simple market-balance approach
indicates. The impact on the aluminium market should also not be exaggerated as the
storage costs, at least for now, are quite high relative to the “saved” roll yield.
Regulation to be tightened if prices get out of control
Physical ETFs would, if successful, interfere with the physical market balances. But for
now, regulatory authorities have been remarkably silent. In fact, it can be argued that
physical ETFs circumvent some of the current regulation regarding position limits in the
futures market. However, if physical ETFs actually do become popular, we are quite sure
that new regulations will emerge. In fact, physical ETFs could be used to interfere with
the futures market if one or more ETF owners were to suddenly hold a dominant share of
the physical market.
Overall, we conclude that physically-backed ETFs could be a potential game changer for
the base metal market. However, due to the fees associated with storage and insurance,
the impact should not be exaggerated not least for metals trading in backwardation.
However, the relative modest value of base metal inventories underlines that new investor
money could potentially interfere significantly with the physical market balance. One
almost certain consequence of physical ETFs is that volatility will continue to stay high or
even rise in the base metal market.
Copper to attract investors due to
strong fundamental case
Source: Ecowin
Storage costs for ETFs are high
Metal
Storage fee,
% p.a.
Aluminium 6.54
Copper 1.56
Lead 5.67
Nickel 0.75
Tin 0.61
Zinc 6.13
Source: ETF Securities prospectus
14 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Commodity-price forecasts
Energy, metals and grains
Source: Bloomberg, Danske Markets.
Oil crack spreads
Source: Bloomberg, Danske Markets.
2010 2011 2012 AVERAGE
05/01/11 10Q4 11Q1 11Q2 11Q3 11Q4 11Q1 11Q2 11Q3 11Q4 2010 2011 2012
NYMEX WTI 88.6 85 89 91 93 95 97 99 101 103 81 92 100
ICE Brent 92.9 87 92 93 94 96 98 100 102 104 81 94 101
Aluminium 2,465 2,365 2,475 2,500 2,525 2,550 2,575 2,600 2,625 2,650 2,202 2,513 2,613
Copper 9,475 8,613 9,500 9,800 9,800 9,800 10,000 10,100 10,200 10,300 7,562 9,725 10,150
Zinc 2,422 2,333 2,400 2,405 2,410 2,415 2,420 2,425 2,430 2,435 2,188 2,408 2,428
Nickel 24,779 23,619 25,000 25,500 26,000 26,500 26,750 27,000 27,250 27,500 21,915 25,750 27,125
Steel 570 518 560 570 580 590 595 600 605 610 488 575 603
Gold 1,384 1,370 1,400 1,425 1,450 1,475 1,450 1,425 1,400 1,375 1,226 1,438 1,413
Matif Mill Wheat (€/t) 251 225 250 240 230 220 220 220 220 220 171 235 220
CBOT Wheat (USd/bushel) 782 707 791 816 796 774 774 774 774 774 599 794 774
CBOT Corn (USd/bushel) 601 562 600 605 610 615 620 625 630 635 441 608 628
CBOT Soybeans (USd/bushel) 1,359 1,245 1,350 1,360 1,370 1,380 1,390 1,400 1,410 1,420 1,043 1,365 1,405
Agriculturals:
front month
Preciuos Metals:
spot (US$/oz)
Base metals:
LME 3M (US$/t)
Energy:
front month (US$/bbl)
Price forecasts AVERAGE
spot Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011 2012
ULSD 10ppm CIF NWE cargo (USD/MT) 810 766 809 822 839 859 873 888 903 917 697 832 895
ICE gasoil (USD/MT) 782 741 784 802 819 844 858 873 888 902 675 812 880
ICE Brent (USD/bbl) 95 87 92 93 94 96 98 100 102 104 81 94 101
3.5% fuel oil FOB ARA barge (USD/MT) 503 491 514 512 509 514 528 543 558 572 449 512 550
1.0% fuel oil FOB NWE cargo (USD/MT) 513 501 524 522 519 524 538 553 568 582 464 522 560
Crack spread forecasts AVERAGE
(USD/MT) spot Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011 2012
ULSD 10ppm CIF NWE cargo 110 125 135 140 150 155 155 155 155 155 100 145 155
ICE gasoil 82 100 110 120 130 140 140 140 140 140 78 125 140
3.5% fuel oil FOB ARA barge -197 -150 -160 -170 -180 -190 -190 -190 -190 -190 -148 -175 -190
1.0% fuel oil FOB NWE cargo -187 -140 -150 -160 -170 -180 -180 -180 -180 -180 -133 -165 -180
Brent (USD/MT) 700 641 674 682 689 704 718 733 748 762 597 687 740
2010 2011 2012
2010 2011 2012
15 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Commodities at Danske Markets
Commodities Research:
Arne Lohmann Rasmussen Chief Analyst, Head of FX and Commodities Research +45 45 12 85 32 arr@danskebank.dk
Christin Tuxen Senior Analyst, PhD +45 45 13 78 67 tux@danskebank.dk
Commodities Sales:
Martin Vorgod Senior Dealer (Denmark) +45 45 14 32 86 mavo@danskebank.dk
Fredrik Åberg Vice President (Denmark/Sweden) +45 45 14 32 85 faberg@danskebank.dk
Michael Winther Senior Dealer (Denmark) +45 45 14 67 67 miwin@danskebank.dk
Antti Malava Senior Dealer (Finland) +358 (0) 105462057 antt@danskebank.com
Anders Winnæss Senior Dealer (Norway) +47 23 13 91 57 awin@fokus.no
Patrick Aran Shawcross Senior Dealer (Northern Ireland) +44 (0) 28 9089 1111 psha@northernbank.co.uk
16 | 5 January 2011 www.danskeresearch.com
Commodities 2011
Disclosure
This research report has been prepared by Danske Research, a division of Danske Bank A/S ("Danske Bank").
Analyst certification
Each research analyst responsible for the content of this research report certifies that the views expressed in the
research report accurately reflect the research analyst’s personal view about the financial instruments and issuers
covered by the research report. Each responsible research analyst further certifies that no part of the compensation
of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed
in the research report.
Regulation
Danske Bank is authorized and subject to regulation by the Danish Financial Supervisory Authority and is subject
to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske
Bank is subject to limited regulation by the Financial Services Authority (UK). Details on the extent of the
regulation by the Financial Services Authority are available from Danske Bank upon request.
The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts’
rules of ethics and the recommendations of the Danish Securities Dealers Association.
Conflicts of interest
Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high
quality research based on research objectivity and independence. These procedures are documented in the
research policies of Danske Bank. Employees within the Danske Bank Research Departments have been
instructed that any request that might impair the objectivity and independence of research shall be referred to the
Research Management and the Compliance Department. Danske Bank Research Departments are organised
independently from and do not report to other business areas within Danske Bank.
Research analysts are remunerated in part based on the over-all profitability of Danske Bank, which includes
investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate
finance or debt capital transactions.
Financial models and/or methodology used in this research report
Calculations and presentations in this research report are based on standard econometric tools and methodology
as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be
obtained from the authors upon request.
Risk warning
Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis
of relevant assumptions, are stated throughout the text.
First date of publication
Please see the front page of this research report for the first date of publication. Price-related data is calculated
using the closing price from the day before publication.
Disclaimer
General disclaimer
This research has been prepared by Danske Markets (a division of Danske Bank A/S). It is provided for
informational purposes only. It does not constitute or form part of, and shall under no circumstances be
considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments
(i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or
options, warrants, rights or other interests with respect to any such financial instruments) ("Relevant Financial
Instruments").
The research report has been prepared independently and solely on the basis of publicly available information
which Danske Bank considers to be reliable. Whilst reasonable care has been taken to ensure that its contents are
not untrue or misleading, no representation is made as to its accuracy or completeness, and Danske Bank, its
affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without
limitation any loss of profits, arising from reliance on this research report.
17 | 5 January 2011 www.danskeresearch.com
Commodities 2011
The opinions expressed herein are the opinions of the research analysts responsible for the research report and
reflect their judgment as of the date hereof. These opinions are subject to change, and Danske Bank does not
undertake to notify any recipient of this research report of any such change nor of any other changes related to the
information provided in the research report.
This research report is not intended for retail customers in the United Kingdom or the United States.
This research report is protected by copyright and is intended solely for the designated addressee. It may not be
reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank’s prior
written consent.
Disclaimer related to distribution in the United States
This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer
and subsidiary of Danske Bank, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S.
Securities and Exchange Commission. The research report is intended for distribution in the United States solely
to "U.S. institutional investors" as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this
research report in connection with distribution in the United States solely to “U.S. institutional investors”.
Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence
of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are
not registered or qualified as research analysts with the NYSE or FINRA, but satisfy the applicable requirements
of a non-U.S. jurisdiction.
Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial
Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in non-
U.S. financial instruments may entail certain risks. Financial instruments of non-U.S. issuers may not be
registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and
auditing standards of the U.S. Securities and Exchange Commission. ou
terça-feira, 1 de fevereiro de 2011
Vale, Agnelli, governo e codigo de mineração
Fri 07 de Janeiro de 2011 [10:48:42] Mensagem nº 817948
Origem: www.projecao.com
NickName: Matumafa
Cadastro: 18/May/2003
Tópico: Mercado
Título: Um contencioso transpôs o governo Lula
Responder Relacionadas (817947)
Um contencioso transpôs o governo Lula
Rosângela Bittar
05/01/2011
A mudança de governo não produziu a superação de fortes, e para alguns injustificados, contenciosos que, inclusive, vinham se agravando no segundo semestre do ano passado. Um dos mais notórios são as difíceis relações do governo Lula com Roger Agnelli. Dificuldades relembradas, nos primeiros dias do ano, pela presença do presidente da Valeem cerimônias de posse e transmissão do cargo em Brasília.
Embora tenha sido uma participação muito comemorada e cercada de agradecimentos, sempre, Agnelli não deve ter deixado de perceber, ao circular pelos salões e gabinetes, que os ruídos na sua conversa com Lula permaneceram no atual governo, sendo possível prever um desenlace a qualquer momento, com a troca de comando da empresa.
O governo Dilma tem a mesma visão que tinha o governo Lula com relação à Vale. Assim, informam interlocutores políticos da presidente, permanece o mesmo tipo de restrição à concepção que preside os negócios da empresa.
Fontes do novo governo comentam que a discussão se dava, antes, e permanece, agora, em torno do papel estratégico da Vale. O ex-presidente tinha uma certeza, segundo seus intérpretes, de que a Vale deveria participar do esforço para impulsionar a economia brasileira degraus acima. Poderia, por exemplo, com grande adequação, fazer usinas siderúrgicas no país, em vez de apenas produzir minério de ferro.
A troca de comando já foi "precificada"
Essa avaliação, creem as autoridades, é consensual com os governadores, de antes e de agora, do Pará. A ex-governadora Ana Júlia Carepa e o atual governador Simão Jatene, segundo análises feitas no âmbito do governo federal, avaliam do mesmo modo a ação da empresa e a conclusão não é favorável. Ambos têm reclamações fortíssimas, acham que a Vale é apenas produtora de buracos, o que, nessas considerações ouvidas em palácios, é até às vezes considerada uma conclusão injusta. "Hoje, a Vale até fecha o buraco e faz recuperação ambiental", comenta um dos críticos.
Mas a realidade projeta antagonismo mais amplo. "Tirar o que pode, sem pagamento de royalty, sem imposto, sem nada, exportar o aço, vender o minério, tudo sem um ínfimo retorno ao Estado, não dá para superar", avalia um dos intérpretes das avaliações que são feitas no governo. A mesma argumentação que orientava a insatisfação do ex-presidente Lula.
A Vale, segundo esta análise, jamais fez questão de atender às expectativas: "Se está me pagando imposto, começo a gostar, mas, não, todos somos obrigados a aceitar as imposições da empresa".
Não é de agora que os governadores têm essa avaliação, os anteriores também a tinham, revelam as avaliações em poder do Planalto. O Pará, dizem os interlocutores do governo federal, origem de grande parte da exportação de minério, não leva nenhuma vantagem. A Vale tem uma reconhecida política de responsabilidade social, mas se nega a ter participação maior pretendida pelos chefes do Executivo estadual.
Lula, por várias vezes, disse à empresa que não havia cabimento só exportar minério, era preciso industrializar o país, produzir aço, diz uma fonte com acesso às negociações ao longo dos últimos meses. Exatamente a mesma visão do novo governo que tomou posse anteontem.
Não se identificam nuances significativas nas posições da presidente Dilma com relação ao assunto. Mesmo os petistas do governo não afinados com a ala mais à esquerda no partido acreditam que a Vale poderia ter tido maior sensibilidade.
O diálogo que foi possível estabelecer com a Petrobras, segundo interlocutores do governo, não serviu de exemplo para as relações com a Vale. As siderúrgicas, também, não reagiram às novas propostas, não querem aumentar sua capacidade produtiva. "Acham que está bom assim, têm o domínio do mercado, quando precisam, importam."
As autoridades já não demonstram preocupação com as consequências da substituição da direção da Vale e acreditam que não há tensão, nem mesmo na empresa, quanto à data em que ela ocorrerá e quem vai para o lugar de Roger Agnelli. O assunto já está sendo tratado abertamente, e o foi em mais de uma roda das solenidades de posse do novo governo.
"O mercado já precificou isso [a saída do executivo]", disse um ministro que conhece o problema. Na recepção da posse da presidente Dilma Rousseff, no Itamaraty, um dirigente de fundo de pensão sócio da Vale dava como certa e iminente a troca de comando, também considerando que isto ocorreria sem maiores traumas ou reações.
O substituto, segundo comentários de integrantes do governo, não será um executivo que caracterize intervenção indevida do governo federal na empresa, que, apesar da maciça participação acionária de entidades da União, é privada. "Não se trata de estatizar a administração da Vale. É uma empresa privada, nós somos grandes acionistas, o BNDEStem 25%, os fundos de pensão outro tanto, temos o direito de influenciar sem sermos criticados por isso", argumentou.
Consideram-se que as reações têm sido exageradas pois até acionistas minoritários, que detêm 5% do capital de uma empresa, podem ter representante no conselho de administração "e gritar à vontade". Se eles podem falar, por que não o governo que tem participação ampla?
Roger Agnelli é bom administrador, saudado como amigo por importantes ministros do governo, é bem-sucedido, e poderia ter feito uma inflexão na sua administração, acredita um assessor que acompanhou de perto as negociações entre o governo e a empresa. "Teria sido bom para o país e para a Vale, mas ele preferiu não fazer", diz a mesma autoridade.
O Código de Mineração, segundo um especialista, sofrerá alterações profundas para conter regras que garantam ao governo ter a influência que pretende exercer nesta política. Pretende-se, ainda, criar normas mais restritivas para os concessionários de exploração mineral.
Todas as mudanças poderiam ter sido feitas com Agnelli, segundo as avaliações. "Ele poderia ter feito um gesto, cedido em algo, tem um espaço importante no mercado, privilegiado na mídia, muita força, daria tudo certo. Poderia ter feito", lamentam. As mudanças não foram feitas, com Agnelli, segundo a mesma avaliação, simplesmente porque ele não quis.
Rosângela Bittar é chefe da Redação, em Brasília. Escreve às quartas-feiras
A saida do Roger nao e problema mas sim os planos do governo para a Vale e setor de mineraçao .
Abraços
tirado do forum projecao
Origem: www.projecao.com
NickName: Matumafa
Cadastro: 18/May/2003
Tópico: Mercado
Título: Um contencioso transpôs o governo Lula
Responder Relacionadas (817947)
Um contencioso transpôs o governo Lula
Rosângela Bittar
05/01/2011
A mudança de governo não produziu a superação de fortes, e para alguns injustificados, contenciosos que, inclusive, vinham se agravando no segundo semestre do ano passado. Um dos mais notórios são as difíceis relações do governo Lula com Roger Agnelli. Dificuldades relembradas, nos primeiros dias do ano, pela presença do presidente da Valeem cerimônias de posse e transmissão do cargo em Brasília.
Embora tenha sido uma participação muito comemorada e cercada de agradecimentos, sempre, Agnelli não deve ter deixado de perceber, ao circular pelos salões e gabinetes, que os ruídos na sua conversa com Lula permaneceram no atual governo, sendo possível prever um desenlace a qualquer momento, com a troca de comando da empresa.
O governo Dilma tem a mesma visão que tinha o governo Lula com relação à Vale. Assim, informam interlocutores políticos da presidente, permanece o mesmo tipo de restrição à concepção que preside os negócios da empresa.
Fontes do novo governo comentam que a discussão se dava, antes, e permanece, agora, em torno do papel estratégico da Vale. O ex-presidente tinha uma certeza, segundo seus intérpretes, de que a Vale deveria participar do esforço para impulsionar a economia brasileira degraus acima. Poderia, por exemplo, com grande adequação, fazer usinas siderúrgicas no país, em vez de apenas produzir minério de ferro.
A troca de comando já foi "precificada"
Essa avaliação, creem as autoridades, é consensual com os governadores, de antes e de agora, do Pará. A ex-governadora Ana Júlia Carepa e o atual governador Simão Jatene, segundo análises feitas no âmbito do governo federal, avaliam do mesmo modo a ação da empresa e a conclusão não é favorável. Ambos têm reclamações fortíssimas, acham que a Vale é apenas produtora de buracos, o que, nessas considerações ouvidas em palácios, é até às vezes considerada uma conclusão injusta. "Hoje, a Vale até fecha o buraco e faz recuperação ambiental", comenta um dos críticos.
Mas a realidade projeta antagonismo mais amplo. "Tirar o que pode, sem pagamento de royalty, sem imposto, sem nada, exportar o aço, vender o minério, tudo sem um ínfimo retorno ao Estado, não dá para superar", avalia um dos intérpretes das avaliações que são feitas no governo. A mesma argumentação que orientava a insatisfação do ex-presidente Lula.
A Vale, segundo esta análise, jamais fez questão de atender às expectativas: "Se está me pagando imposto, começo a gostar, mas, não, todos somos obrigados a aceitar as imposições da empresa".
Não é de agora que os governadores têm essa avaliação, os anteriores também a tinham, revelam as avaliações em poder do Planalto. O Pará, dizem os interlocutores do governo federal, origem de grande parte da exportação de minério, não leva nenhuma vantagem. A Vale tem uma reconhecida política de responsabilidade social, mas se nega a ter participação maior pretendida pelos chefes do Executivo estadual.
Lula, por várias vezes, disse à empresa que não havia cabimento só exportar minério, era preciso industrializar o país, produzir aço, diz uma fonte com acesso às negociações ao longo dos últimos meses. Exatamente a mesma visão do novo governo que tomou posse anteontem.
Não se identificam nuances significativas nas posições da presidente Dilma com relação ao assunto. Mesmo os petistas do governo não afinados com a ala mais à esquerda no partido acreditam que a Vale poderia ter tido maior sensibilidade.
O diálogo que foi possível estabelecer com a Petrobras, segundo interlocutores do governo, não serviu de exemplo para as relações com a Vale. As siderúrgicas, também, não reagiram às novas propostas, não querem aumentar sua capacidade produtiva. "Acham que está bom assim, têm o domínio do mercado, quando precisam, importam."
As autoridades já não demonstram preocupação com as consequências da substituição da direção da Vale e acreditam que não há tensão, nem mesmo na empresa, quanto à data em que ela ocorrerá e quem vai para o lugar de Roger Agnelli. O assunto já está sendo tratado abertamente, e o foi em mais de uma roda das solenidades de posse do novo governo.
"O mercado já precificou isso [a saída do executivo]", disse um ministro que conhece o problema. Na recepção da posse da presidente Dilma Rousseff, no Itamaraty, um dirigente de fundo de pensão sócio da Vale dava como certa e iminente a troca de comando, também considerando que isto ocorreria sem maiores traumas ou reações.
O substituto, segundo comentários de integrantes do governo, não será um executivo que caracterize intervenção indevida do governo federal na empresa, que, apesar da maciça participação acionária de entidades da União, é privada. "Não se trata de estatizar a administração da Vale. É uma empresa privada, nós somos grandes acionistas, o BNDEStem 25%, os fundos de pensão outro tanto, temos o direito de influenciar sem sermos criticados por isso", argumentou.
Consideram-se que as reações têm sido exageradas pois até acionistas minoritários, que detêm 5% do capital de uma empresa, podem ter representante no conselho de administração "e gritar à vontade". Se eles podem falar, por que não o governo que tem participação ampla?
Roger Agnelli é bom administrador, saudado como amigo por importantes ministros do governo, é bem-sucedido, e poderia ter feito uma inflexão na sua administração, acredita um assessor que acompanhou de perto as negociações entre o governo e a empresa. "Teria sido bom para o país e para a Vale, mas ele preferiu não fazer", diz a mesma autoridade.
O Código de Mineração, segundo um especialista, sofrerá alterações profundas para conter regras que garantam ao governo ter a influência que pretende exercer nesta política. Pretende-se, ainda, criar normas mais restritivas para os concessionários de exploração mineral.
Todas as mudanças poderiam ter sido feitas com Agnelli, segundo as avaliações. "Ele poderia ter feito um gesto, cedido em algo, tem um espaço importante no mercado, privilegiado na mídia, muita força, daria tudo certo. Poderia ter feito", lamentam. As mudanças não foram feitas, com Agnelli, segundo a mesma avaliação, simplesmente porque ele não quis.
Rosângela Bittar é chefe da Redação, em Brasília. Escreve às quartas-feiras
A saida do Roger nao e problema mas sim os planos do governo para a Vale e setor de mineraçao .
Abraços
tirado do forum projecao
Assinar:
Postagens (Atom)