Chinese rare earth metals prices soar

By Leslie Hook

Published: May 26 2011 18:20 | Last updated: May 26 2011 19:22

A gravity-defying leap in the price of Chinese rare earth metals has triggered fears that the cost of components used in a range of goods from mobile phones to hybrid cars could soar.

The three to fivefold jump in prices since January comes after China, the world’s biggest producer of rare earths, has clamped down on domestic output.

The implications could be far-reaching. Although annual consumption of the metals is small relative to that of other commodities, rare earths are found in everything from fluorescent lights to wind turbines. They are very difficult, if not impossible, to substitute.

Industrial buyers are in shock after witnessing the price of rare earths such as cerium oxide jumping 475 per cent in just five months, amid falling supplies.

“I’ve never seen anything like it,” says one US-based purchaser of rare earths. “People are trying to wriggle out of using rare earths in any way they can, whether by developing new products or finding substitutes.”

Rare earths came under the spotlight after China, which produces more than 90 per cent of the world’s total output, started to reduce export quotas two years ago. Beijing’s influence aroused concern when exports of rare earths to Japan were temporarily suspended after a diplomatic dispute.

Following that de facto embargo, governments around the world, particularly Washington and Tokyo, have stepped up their efforts to develop other sources of supply. But those efforts will take years. In the meantime, Beijing has tightened regulations on its own polluting rare earths sector as part of a programme to clean up Chinese mines. Many expect China’s rare earth production to fall as a result.

As China cuts further export quotas – this year’s overseas sales licence is 4.5 per cent lower on an annualised basis than last year’s and more than 40 per cent below the 2009 quota – global demand for the metals has been growing.

Beijing has also clamped down on smuggling, which at one point accounted for about one-fifth of total sales, further squeezing the global market.

read the rest of the article here: FT.com / Commodities - Chinese rare earth metals prices soar

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Euro Price of Gold Hits Record High As "Debt Woes Spreading" Beyond Greece - Gold Matters

THIS STORY IS STILL DEVELOPING.... AS REALITY STEPS IN...

Monday, May 23, 2011 8:55 AM EDT

Euro Price of Gold Hits Record High As "Debt Woes Spreading" Beyond Greece

By Ben Traynor

The Dollar price to Buy Gold was trading in a tight range around $1510 on Monday morning in London - a 1% gain on the start of last week - as stocks and commodities fell after ratings agencies gave fresh warnings on Eurozone sovereign debt.

In Germany and Spain, meantime governing parties suffered local election defeats.

The Euro lost nearly 1% against the US Dollar in early trade, dropping through the $1.40 mark.

The Gold Price in Euros shot to a new all-time high of €34,746 per kilogram (€1080 per ounce) - 1% above Friday's close. The Euro price to Buy Gold has risen 16% since this time last year.

Silver Prices meanwhile remained flat - trading just under $35 per ounce, virtually unchanged from two weeks ago.

"One problem for the struggling euro zone countries is that they've given up currency flexibility," says Steve Barrow, currency strategist at Standard Bank. "Without the ability to lower interest rates or ease fiscal policy, the inability to devalue makes things tough."

"The week is starting in a decidedly fearful mode, with the spillover from Friday's concerns about Greek debt restructuring still dominating markets," Société Générale's head of foreign-exchange strategy Kit Juckes.

The yield on Greek sovereign debt set a new all-time high of 17% on Monday morning.

"Greece risks a sovereign default," warned French finance minister Christine Lagarde - favorite to be the next head of the International Monetary Fund (IMF) - warned on Friday. "Finance ministers have expressed strong doubts about [Greece's] sluggish progress."

"The Euro is likely to search for the bottom this week as Greek debt woes appear to be spreading to other countries," reckons Mizuho Trust and Banking trader Yoshio Yoshida.

"If the crisis starts to involve other nations beyond Greece, then we could see gold heading to a new record high," Ong Yi Ling, Singapore-based investment analyst at Phillip Futures told Reuters.

Ratings agency Fitch cut its rating on Greek sovereign debt by three grades on Friday, to BB+ to B+. On the same day, Standard & Poor's changed its outlook for Italy's debt from stable to negative, citing "potential political gridlock" and "weak" growth prospects.

Over in Spain, meantime, early results show the ruling left-wing Socialist party is heading for heavy losses in Sunday's regional elections, while tens of thousands continue to pack city streets across the country to protest against unemployment. The opposition Popular party looks to have gained 37.5% of the vote - 10% more than the Socialists.

"Should [Spain] be under severe stress, the capacity of Europe to deal with it would be put in question," says Laurent Bilke, senior economist at Nomura. "Rather than the local elections, it is more the resemblance of Madrid's Plaza de la Puerta del Sol to Cairo's Tahrir Square which is disturbing for the markets."

German chancellor Angela Merkel's party also suffered a local election defeat at the weekend, with the center-right Christian Democratic Union party finishing behind the Greens in Bremen - the first time this has happened in a state election.

Euro Price of Gold Hits Record High As "Debt Woes Spreading" Beyond Greece - Gold Matters

The MasterMetals Blog

Mongolia, the next commodity powerhouse (?)

Mongolia is going to be a major future supplier of commodities from coal through gold to copper – and maybe even crude oil. But how soon will this landlocked country with a population of 3m really begin delivering these resources to the world in a significant, market-moving way?

While at first Mongolia seemed to be the poster child for liberalization, in the last several years that has changed as the population has demanded a larger share of the resource bonanza to come - Ivanhoe Mines and Rio Tinto's Copper-Gold behemoth, Oyu Tolgoi, being the headline project. While justifiable to a certain degree, in reality it has meant many of the mining projects on the drawing board have been delayed. The China issue remains a particularly prickly subject, as the FT notes in the article below,

Although Mongolia is located right next to its biggest customer, China, their history of rivalry makes Mongolia suspicious of its southern neighbour. And capricious politics – parliament has tried to oust Dashdorj Zorigt, minister for mineral resources and energy, twice this year – mean that economic logic is sometimes subordinate to politics or nationalism.

Glencore gets off to a Rocky Start

Glencore's IPO, 4X Oversubscribed, yet it couldn't even muster a 1 p gain on its first day of trading...

From the FT, link to full article below.

Glencore’s stock market debut left investors who had hoped for a big first day rally unimpressed, after the shares closed at the offer price of 530p. [...]

Following the issue of nearly $9bn worth of new shares, including an overallotment option, the enlarged company will have a market capitalisation of $62bn

The banks underwriting the initial public offering, led by Citigroup, Credit Suisse and Morgan Stanley, supported Glencore’s shares in the last five minutes of trading to prevent the price dropping below the 530p level.[...]

Glencore’s advisers had hoped that the shares could rally by 5 to 10 per cent on Thursday after the$11bn IPO was more than four times subscribed. [...]

“If you are genuinely four or five times oversubscribed, why is the share price flat?”

Bankers had hoped that a strong initial performance from Glencore would hearten investors and reinvigorate the sluggish market for European IPOs. [ So much for that...!]

 FT.com / Commodities - Glencore debut underwhelms investors



The MasterMetals Blog

MasterMetals: Precious Metals Charts in Euros

Gold, Silver, Platinum and Palladium Charts in Euros

Prices in Euros per ounce and per kilo in 8 and 24 hour intervals

    Precious Metals in Euros    

Gold Price per ounce 8 hour 24 hour Price per kilo 8 hour 24 hour

Source: KitcoCharts,/Kitco.com

MasterMetals: Metals EUR

The MasterMetals Blog

For Paulson, Gold Still Glitters

He's not just in for the short term trade. He's in for all the right reasons, and knows there is still much more to go..

For Paulson, Gold Still Glitters

NYTimes.com

BY AZAM AHMED

Jin Lee/Bloomberg NewsJohn A. Paulson appears to have raised his bet on gold.

You can’t accuse the hedge fund manager John A. Paulson of lacking loyalty.

Even as big-name investors like George Soros peel back their bets on gold, helping to send prices falling, Mr. Paulson, who heads the $37.5 billion hedge fund Paulson & Company, has chosen to stay the course, according to recent regulatory filings that indicate he actually increased his bets on certain companies exposed to gold.

Gold, to be sure, has treated him well. Mr. Paulson netted $5 billion in personal gains last year thanks to his heavy bet. The hedge fund manager doubled down on the precious metal in recent years, believing that the dollar would lose value.

To implement that long-term bet, he created a gold fund, which invests in gold-exposed investments like mining companies, as well as a class of shares in all of his other funds denominated in the precious metal.

The most recent sell-off, in which gold has slid about 5 percent since the start of the month, was prompted in part by heavy selling from investors like Mr. Soros and hedge funds like Eton Park Capital Management. In January, when the precious metal was taking a similar beating, Mr. Paulson’s gold fund was down 12 percent, his Advantage Fund was down more than 5 percent, and all of his gold-denominated funds were in negative territory.

The last few months may have tested his resolve.

Through April, his Advantage Fund, the largest at $18.3 billion, is down 1.2 percent in the regular share class and up 5.6 percent in the gold share class, according to an investor who spoke on condition of anonymity because the information was not public.

Figures through May were not available. A spokesman for Mr. Paulson declined to comment.

At a recent investor conference in Las Vegas, Mr. Paulson reiterated his belief that gold was not a bubble, according to notes from an investor who attended the conference. Mr. Paulson said owning gold would add to returns while also protecting against inflation. He said his funds were ready for such inflation, which he sees over the next three to five years, thanks in part to the quantitative easingpolicy of the Federal Reserve.

Mr. Paulson recently acquired more shares in AngloGold Ashanti, according to his most recent 13F filings, which reflect Paulson & Company holdings through the end of March. Mr. Paulson told investors that AngloGold Ashanti – the third-largest gold producer in the world and the largest single holding in his Advantage Fund – was the best managed gold company in the world.

At the conference, Mr. Paulson warned the 200 investors and potential clients gathered that they better be prepared to accept higher volatility for now. Mr. Paulson, who rose to fame after making billions betting against the subprime mortgage market, told them he did not see the housing market normalizing until 2013.

Mr. Paulson also said during the conference that he thought the best opportunities in the market were restructured equities – or stocks in companies that are coming out of a rough period.

While Paulson & Company has long held meetings for its investors, this is the first year the hedge fund has also held meetings for investors in individual funds. The conference was held for investors in the Advantage Fund, Mr. Paulson’s largest with about $18 billion in assets.

The lavish affair included tours of the MGM Resorts and Cesar’s Entertainment — Mr. Paulson owns stakes in both. For kicks, attendees had the option to take a helicopter ride to the Grand Canyon.

During the conference, Mr. Paulson offered some details about his fund. He crowed about the alignment of interests with his investors. That’s a complicated way to say that employee capital makes up 42 percent of the money in the fund, so everyone cares deeply about returns. Mr. Paulson’s own wealth makes up a big part of that figure.

And for those worried about the ever-present fear of succession, Mr. Paulson put them at ease. He plans to stay at the helm of his enterprise for another 15 years until he reaches age 70, investors said.

For Paulson, Gold Still Glitters - NYTimes.com

The MasterMetals Blog

"Don't be fooled, this gold cycle is not the same as 1980"

 David Levenstein argues in Mineweb article that the gold price is not in a bubble. In 1980, gold rallied on the back of rising inflation and political risk ( Iran etc..). Today, things are completely different, Budget deficits are spiralling out of control and government debt is simply exploding. What we are seeing is a debasement of many major currencies. The dollar and many other currencies are under threat. There is a lot more to this bull market in precious metals than in 1980.

Don't be fooled, this gold cycle is not the same as 1980

Sometimes cycles have the habit of repeating themselves, but in the case of gold, the differences between the current situation and the early 1980s are significant 

Author: David Levenstein
Posted:  Tuesday , 17 May 2011

JOHANNESBURG -  Mineweb 

Gold prices were generally range bound between $1525 and $1480 during last week as the US dollar extended its recent gains. Commodities remained weak even though selling momentum eased a bit. Crude oil prices continued to slide and silver dipped to a new low. The CRB commodities index also extended recent declines and fell as low as 333.50. 

Now that the price of gold has dropped by around $85 an ounce, many market participants are suggesting that gold was in a bubble just as it was in 1980 - and is headed much lower.
Firstly, I would like to mention, that while certain cycles have a habit of repeating, there is no guarantee that they will. If they did, making money in the markets would be the easiest thing in the world. All you would need to do is measure the time period between cycles and trade accordingly. And, if anyone has tried that, you will see that there is no truth in that assumption. The main reason being, in order for a cycle to repeat, all the underlying fundamentals impacting on the market should be the same as the previous cycle. In most instances it is almost impossible for the fundamentals to be exactly the same as they were previously, but when they are very similar the probability of a repeating cycle is relatively high. For, example a country defaulting on its debt will likely have the same impact on their currency as another country defaulting on their debt. Getting back to my point about the gold price now and in 1980, let me say categorically that as far as I am concerned there are no comparisons and therefore we should not expect the same conclusion. 

For most of 1979 the price of gold was trading below $300 an ounce. The price of the yellow metal traded between $240 an ounce and $280 an ounce for the first five months of the year. Then, during the month of June it broke through the key resistance of $280 and by mid-July prices had hit $315 an ounce. Then, after pulling back to $280 an ounce the price had a parabolic move from $280 an ounce all the way up t0 $875 five months later. The price of gold had moved more than three times in less than 6 months. This is a parabolic move. Since 2000 when the current bull market began we have not seen one parabolic move. In fact the rises have been very gradual but consistent. This is one major difference. But, when we study the fundamentals between these two time periods we can see without absolute clarity that there is nothing similar. 

The parabolic move in gold in 1980 was caused by a series of events. There was a hostage crisis involving American captives in Iran, an invasion of Afghanistan by the Soviets, oil prices were escalating almost weekly, and so were gold and silver prices, in one of the greatest currency panics ever to hit the U.S. dollar. Inflation was nearly 10% and increasing, and the worldwide perception was that the dollar was under siege. 

Beginning in September 1979, the price of gold began to surge almost daily. The financial press reported frenetic trading in gold and other precious metals. . The Iran hostage crisis was a diplomatic crisis between Iran and the United States Fifty-two US citizens were held hostage for 444 days from November 4, 1979 to January 20, 1981, after a group of Islamic students and militants took over the Embassy of the United States in support of the Iranian Revolution. 

Sixty-six Americans were taken captive when Iranian militants seized the U.S. Embassy in Tehran on November 4, 1979, including three who were at the Iranian Foreign Ministry. Six more Americans escaped and of the 66 who were taken hostage, 13 were released on November 19 and 20, 1979; one was released on July 11, 1980. The remaining 52 were released on January 20, 1981, at the very moment that Ronald Regan had completed his inaugural speech after having been sworn in as President of the United States to replace Jimmy Carter. 

Then, on December 23, 1979, Soviet military units occupied Kabul, the capital of Afghanistan and by December 28th, the Soviet Union seized control of Afghanistan.  The initial Soviet deployment of the 40^th Army in Afghanistan began on December 24, 1979 under Soviet premier Leonid Brezhnev. The final troop withdrawal started on May 15, 1988, and ended on February 15, 1989 under the last Soviet leader Mikhail Gorbachev.
Inflation in the US had been on the rise in the late 1970s and had risen to an all-time high of around 15% by January 1980. Gold prices had been rising with inflation as measured by CPI though the rise in inflation wasn't the primary reason for the gold price spike in Jan 1980. 

In an attempt to curb inflation, Paul Volcker, the Federal Reserve Bank Chairman at the time, increased interest rates from around 13% to 20%. The federal funds rate, which had averaged 11.2% in 1979, was raised by Volcker to a peak of 20% in June 1981. The prime rate rose to 21.5% in '81. 

In those years, currency trading was not what it was today and the euro had not been conceived. The way people communicated in those years was completely different. There was no internet, and, in fact, the fax machine had not been invented. All communications were done telephonically and or by telex, something that today's generation have probably never heard of. And, not many people knew anything about China. 

In the current bull market, things are completely different. The price of gold has been driven higher mainly due to the declining values of the major currencies in particular the US dollar. But, the other major currencies such as the euro, the Yen and sterling don't look all that healthy either. Budget deficits are spiralling out of control and government debit is simply exploding. As governments continue with their loose monetary policies they simply continue to debase their currencies. This is not the first time they have done this, but this time around, the size of debt is just unimaginable. And, gold is simply fulfilling one of its traditional roles as a hedge against the declining values of fiat currencies. 

Today the currency market has become the largest market in the world. Anyone can participate and trading can be done instantaneously so long as one has access to the internet.  China has become the second largest economy in the world from being number eleven in 1980. It has also become the largest the producer of gold in the world and soon it will be the largest consumer of gold in the world. Numerous central banks are adding gold to the reserves and at the same time diversifying away from gold. 

If you think the gold price is a bubble and headed lower, then you obviously believe that the dollar as well as the other major currencies are going to strengthen and that there are no monetary problems in the world. And, you believe that global  government debt as well as burgeoning budget deficits are completely overstated. You also do not see the value of gold in such times and will probably invest in US Treasuries as a safe haven asset. I say good luck to you. I am sticking with the precious metals in particular gold and silver. 

TECHNICAL ANALYSIS

The price of gold is approaching the support level of the upward trend as well as the support of the medium-term 50 day MA. A flat Elliot Wave ABC correction would see support at around $1470. With all these technical indicators converging at the $1470/$1480 level, I expect to see a rebound in prices relatively soon.
                                                      
About the author
 David Levenstein began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients. www.lakeshoretrading.co.za
Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.

"Don't be fooled, this gold cycle is not the same as 1980"- Mineweb

Chinese Copper imports

Imports are coming down as credit is getting tightened

The message from these two charts is simple: Chinese copper imports are coming down as credit is getting tightened. As a result, Shangai inventories are being drawn-down. We would expect imports to bounce back in July-August when 1- copper prices will fall further and 2- inventories will be so low that China will be forced to import again.

Chinese Copper imports ( SHFCHAD Index GP):

They are coming down as China is tightening credit and trying to move prices down.

Shangai Copper inventories ( SHFCCOPD Index GP) are coming down as a result

CONCLUSION: as soon as the inventories will fall much below 100,000 T we may see the Chinese back importing massively which we see in July-August.

The only downside risk is further credit tightening which may limit Chinese imports.

Soros Dumped Most of Gold Stake

 Soros Dumped Most of Gold Stake: SEC Filing

CNBC.com Article:

Billionaire investor George Soros's hedge fund dumped most of its gold holdings during the first quarter, according to a securities filing on Monday.

Full Story:
http://www.cnbc.com/id/43052132

------------------------------------------------

Citigroup recommends reducing resources exposure in order to cut risk

Citigroup recommends reducing resources exposure in order to cut risk
MarketWatch
By Sarah Turner

SYDNEY (MarketWatch) -- Citigroup Australian equity strategists said Tuesday that they recommend investors reduce exposure to the resource sector in order to cut risk. They cut miners to a small overweight in their portfolio and moved to underweight in energy stocks. At the same time, they lifted their positioning in defensive sectors of the market, by raising healthcare firms to index level and upping weightings in banks and other industrials. 'While resources have underperformed by about 5% recently, this only reverses gains a month earlier, and the sector could fall further,' they said.
Citigroup recommends reducing resources exposure - MarketWatch

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Sprott Loves Silver, But Slashes Many Mining Stakes

Sprott Loves Silver, But Slashes Many Mining Stakes

Yahoo! Finance

the tickerspy.com Staff, On Monday May 16, 2011, 10:01 am 

 

Canadian commodity hedge fund manager Eric Sprott was shifting his precious metals-focused bets during Q1 as the huge bull run for gold and silver continued.

In recent months, Sprott has been particularly bullish on silver, as the metal went stratospheric before pulling back sharply in commodities trading. In an interview in early April, Sprott predicted silver could go to $100 an ounce and called it "the investment of this decade." In early May, he called the underperformance of silver miners as compared to the metal itself, "shocking."

A look at Sprott Asset Management's top-15 U.S.-listed equity holdings from the end of Q1 shows that the bullion-backed Sprott Physical Gold Trust ETV (NYSE: PHYS - News), which debuted in early 2010, remained the firm's largest position. Sprott also introduced a similar, silver-backed entity in late 2010, the Sprott Physical Silver Trust (NYSE: PSLV - News). Elsewhere, Sprott was putting capital to work, with a new stake in gold miner Extorre Gold Mines (AMEX: XG - News) and increased stakes in Yamana Gold (NYSE: AUY - News), Brigus Gold (AMEX: BRD - News), Eldorado Gold (NYSE: EGO - News), and Sprott Resource Lending (AMEX: SILU - News), a Sprott-controlled firm that provides funding for commodities companies. 

Elsewhere, Sprott was trimming stakes in Barrick Gold (NYSE: ABX - News), Golden Minerals (AMEX: AUMN - News), Alexco Resource (AMEX: AXU - News), Claude Resources (AMEX: CGR - News), IAMGold (NYSE: IAG - News) and Exeter Resource (AMEX: XRA - News). Sprott was reducing its largest silver bets in the three months ended March 31. Sprott slashed its Silver Wheaton (NYSE: SLW - News) and First Majestic Silver (NYSE: AG - News) stakes during the period, but the latter was nonetheless the firm's second-largest equity holding heading into Q2.

Looking at tickerspy.com's graph charting the performance of Sprott's end-of-Q1 holdings so far in Q2, one can see that the holdings have been quite volatile compared to the broader market. If you want to see how your performance stacks up to Sprott's or take a look at some of the other stocks it's invested in, visit tickerspy.com to see the firm's top holdings and a chart of their combined performance.

Pro portfolio performance is based on institutions' top-15 holdings as disclosed in quarter-end filings with the SEC. Pro performance does not take into account additional holdings beyond the top 15 nor does it include positions that are not required to be disclosed by the SEC. As such, Pro portfolio performance should be considered an approximation and not a precise record of how an institution has performed over time.

http://finance.yahoo.com/news/Sprott-Loves-Silver-But-indie-2810516445.html?x=0&.v=1

http://www.printfriendly.com/print?url=http://finance.yahoo.com/news/Sprott-Loves-Silver-But-indie-2810516445.html?x=0

'Widowmaker' Oil Trade Lives Up to Its Name - CNBC

Widowmaker' Oil Trade Lives Up to Its Name

OIL COMMODITIES MARKETS ECONOMY INTEREST RATES INFLATION FUEL PRICES GASOLINE FUTURES NYSE FTSE

CNBC.com

| 12 May 2011 | 03:10 AM ET

Big oil traders who bet on a rise in gasoline prices relative to heating oil ahead of the summer driving season may have thought they broke the curse of a "widowmaker" trade even as oil prices crashed.

They were dead wrong. Some of the traders who shun the big, directional bets that hedge funds love have crowded into a common springtime trade: betting gasoline futures on the New York Mercantile Exchange (NYMEX) will hold at a premium to heating oil futures as consumption accelerates into the summer.

They have been counting their winnings since March, when the spread staged its biggest seasonal rise since 2007.

The surge accelerated earlier this week as the Mississippi River swelled, threatening refinery operations in Louisiana and Tennesse.

But then came Wednesday, when gasoline futures collapsed in the biggest absolute drop in more than two years.

The spread dropped by over 17 cents, the biggest one-day move since September 2009.

"There will be widows. Some people got pretty whipsawed. But that trade is not for the faint of heart," said Stephen Schork, editor of the Schork Report.

Indeed, lately it's been a stomach-churning ride. The spread has moved by more than 6 cents in either direction in four of the past eight trading sessions; prior to last week it moved by such a margin only nine times in two years.

First, the U.S. Energy Information Administration came out with data showing an unexpected build in gasoline stocks as the threat level for refineries from the Mississippi river abated.

This, coupled with mounting concerns that gasoline pump prices near the critical $4 a gallon level will cause U.S. consumers to balk, pushed many bulls to the exit.

RBOB gasoline at one point slumped by over 30 cents or 8.95 percent.

The price drop was so big it triggered a five-minute trading halt in all three oil major contracts for the first time since Sept. 22, 2008.

Victims

The "widowmaker" trade tends to be popular among trading houses and hedge funds which house some of the biggest speculative traders in the market.

One victim is said to have lost $500 million on a single bet in the summer of 2008 when gasoline failed to reach a premium to heating oil, contrary to the usual pattern.

On Wednesday, traders said a big Europe-based oil trading company was forced to stop out, or reverse its long position on gasoline to prevent further losses.

Volumes spiked to the highest level in hitory as dealers rushed to place orders.

"If you were long you were happy this time yesterday and you're probably not so happy now," said an oil trader with a European bank. "The flood story freaked everyone out. The market attracted tourists and then we overshot."

U.S. refineries, which ramped up their gasoline production by 111,000 barrels-per-day last week, according to the EIA, are also set to take a hit if the slump in the futures market is carried to spot markets over the coming few days.

The price crash in theory wiped off more than $5 in profits for every barrel of crude processed into gasoline.

Traders who sensed that the price may have been reaching a peak were relieved on Wednesday to have sold near the top.

The signs were already there. Gasoline demand has been on a continuous slump since the second week of April according to EIA's 4-week average gasoline supply data.

"Luckily, I sold this morning. I'm too scared to watch it," said a gasoline trader with a bank.

Before Wednesday's crash, gasoline was trading at a record premium to heating oil, according to Reuters data going back to 2008.

Others saw the plunge as symptomatic of a new oil trading environment, characterized by huge price swings following last week's record drop in oil prices, for no obvious reason.

In percentage terms gasoline price fell by less than crude in last week's price crash, but on Wednesday they led the whole complex lower, analysts said.

"Last week's steep slide has increased volatility in the market, and we are still responding skittishly to that.

Often in the period after a crash like that things become a little more volatile," said Gene McGillian, analyst at Tradition Energy.

Flagship commodity fund Astenbeck II run by top Phibro trader Andrew Hall was one name that suffered a double-digit loss last week as oil prices tumbled.

© 2011 CNBC.com

commodities - 'Widowmaker' Oil Trade Lives Up to Its Name - CNBC

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-- The MasterFeeds

Clive Capital On Commodity Slam... er...Outlook

Clive Capital On the Commodity Slam...sorry,we mean, Outlook

www.businessinsider.com

Until we learn which hedge funds REALLY got clobbered, Chris Levett's $5 billion Clive Capital, which lost $400 million, will be known as the hedge fund that just got clobbered by the commodities dump.

Clive was "at a loss to explain what had caused crude oil markets to be “annihilated," Clive's management said, according to the FT.

Click here to see what might have caused it >

We assume Levitt's will bounce back. But for some smaller funds, what happened last week was game over.

Until then, check out what Clive Capital was saying about commodities in October.

Below is a summary from their October letter to investors. We published Clive's macro view in November.

From Clive Capital's October letter to investors:

Energy

-- Bullish on gas, power, and emissions

• Estimates for U.S. onshore oil production growth are continually revised up
• In Asia, Chinese oil demand continues to beat expectations
• With floating inventories of crude and products continuing to whittle away, oil fundamentals appear to be tightening. Onshore commercial inventories would be the next to draw, which should be supportive to oil spreads in general.
• Ethanol shortages in 2011 look increasingly possible, which would be supportive for gasoline, particularly in Brazil and the U.S.
• Gas is expected to remain in a competitive position versus Coal all winter long and throughout 2011.
• Germany will reach 2008 level power consumption by the end of 2011 if current growth trend is sustained.

Precious Metals

-- Bullish on Precious Metals Growing fears over the value of the major paper currencies as well as the persistence of ultra low real rates across the world should be bullish for Precious Metals as a group going forward. We made no major changes to our Gold positioning and should continue to benefit from a move higher in prices... PGM’s also rallied in October; with Palladium outperforming Platinum and seeing Palladium prices reach 9-year highs. The longer-term bullish supply story is not only a function of constrained supply but also of increased cost pressures (particularly in the face of a strong South African Rand and power tariff increases), which are reducing producer profit margins despite these higher prices. On the demand side, tighter emissions legislation around the world has been a positive driver for many years. The implementation of regulations for off-road vehicles (e.g. those used in agriculture, construction) in Europe and North America in 2011 as well as demand from stationary fuel cells should add two further demand components to markets that are already struggling/unable to supply enough metal for all the other uses.

Base Metals

-- Bullish on Copper and Tin Market balances for 2011 are pointing towards market deficits in Copper, Tin and Lead while Nickel and Zinc should see small surpluses... Copper mine supply is expected to expand by less than 500kt in 2011 (compared to annual refined production of around 19mt)... To put this into perspective, global demand is expected to expand by around 700kt (with the bulk of that growth coming from China and using very conservative assumptions for the G3). As such, there is a strong likelihood that the market will record an even bigger deficit in 2011 than the estimated 300-400kt deficit in 2010. Add in the growing likelihood of physically backed Base Metal ETFs and one could easily envisage a scenario where several metals, particularly Copper and Tin, trade well into record territory in 2011 while others, such as lead, Zinc and Nickel (which are still well below their respective 2007/08 peaks) will see prices rising closer to those prior highs.

Read more: http://www.businessinsider.com/check-out-what-clive-capital-was-saying-about-commodities-before-the-annilhilation-2011-5#ixzz1LrXHGfGX

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Clive Capital On Commodity Outlook


Also read:

Clive Capital Investor Letter on the Commodity Slam 

The Biggest Commodities Hedge Fund In The World On QE And Why It's Still Bullish On China

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