Arab Spring drives up Middle East break-even oil price

Arab Spring drives up Middle East break-even oil price
IMF estimate of Saudi break-even oil price: $80/ barrel!!
Financial Times, 10:07am Wednesday November 2nd, 2011
Arab Spring drives up Middle East break-even oil price
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By Javier Blas in Singapore
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Ballooning state budgets have pushed up the price target for crude oil, says Javier Blas
Read the full article at: http://on.ft.com/vr1BVM

MF Global collapse hits Australia commodities futures - FT.com

MF Global collapse hits Australia commodities futures

ASX, the Australian exchange operator, has shut down the country's agricultural commodities market after the collapse of MF Global, highlighting the impact that the bankruptcy of the US-based broker is having on futures markets.

The exchange said it took the decision on Tuesday to close the grain and wool markets "until further notice" given the large amount of outstanding contracts held by the US broker.

The indefinite shutdown in Australia goes far beyond the measures taken on Monday by other leading commodities exchanges, including the CME Group, IntercontinentalExchange and the London Metal Exchange, which only suspended the broker while the rest of trading continued unaffected.

MF Global has an outsize market share in Australian commodities markets. The company said on its website that its customers accounted for "over" 80 per cent of the turnover in the country's wool contracts, suggesting the market could be heading for a long shutdown. MF Global was "fortunate to count among its clients the majority of the leading traders, exporters and processors in the wool industry," according to its website.

Australia is the world's largest wool exporter and the country's wool futures are one of the most important global benchmarks for the fibre industry.  

"Given the significant percentage of open interest held by [MF Global], in order to maintain a fair, orderly and transparent market, the agricultural markets for grain and wool have been suspended until further notice," the exchange said on a notice to its members.

MF Global has been a key force behind the development of futures contracts for Australia wheat after the liberalisation of the country's grain market in 2008.

In the absence of MF Global, the exchange would need to find additional participants to ensure sufficient turnover in the contracts once trading reopened, said a Sydney-based broker.

"They [MF Global] were quite happy to make markets. You remove them from the market then the market now has to look for another liquidity provider. I think that will happen but we'll really need to give it a bit of time," said Jonathan Barratt, head of Australia's Commodity Broking Services.

ASX did not answer calls seeking comment.

Additional reporting by Sarah Mishkin in Hong Kong

http://www.ft.com/intl/cms/s/0/6abd1840-0461-11e1-ac2a-00144feabdc0.html#axzz1cTIdbBAG

How to Be a Great Commodities Investor

good piece by Steve Sjuggerud on the latest buying opportunity in the commodities sector

How to Be a Great Commodities Investor

By Dr. Steve Sjuggerud
Tuesday, November 1, 2011

"THIS is what a market bottom in copper feels like," I told Brett Eversole on October 20.

Brett has worked right next to me for over a year... And he's never heard me say that before.

The last time I said anything like that was in late 2008, and I made a triple-digit return...

The last time I bought a handful of commodities companies was in late 2008 – because that was the last time it felt like a bottom to me in commodities. I sold all those commodity companies in January 2010, for a double or more.

I haven't owned commodities companies since... until 11 days ago, when I bought a handful of small-cap commodities companies on October 21.

Could I make triple-digit profits this time? It sure is possible... The setup conditions are similar to what they were in late 2008.

"What makes you say this feels like a bottom in copper?" Brett asked me.

It felt like a bottom because "investor sentiment" about copper had reached its lowest level since late 2008... Also, large speculators in copper were "net short" – meaning they were betting against the price of copper – for the first time in years... And on October 20, the price of copper fell 6.6% in Shanghai, with no good explanation...

It felt like copper had hit the "puke point" that day.

Beyond all that, after nearly two decades in this business, it "felt" like a bottom. When the market bounced back the next day, I bought. Copper is up about 18% since then – and many commodity stocks are up much more.

How can you get to this point? How can you become a confident commodities investor?

First, a bit of reading will take you a long way... In the last three weeks, I've read a handful of great books, including a few great ones on commodities.

Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks by Adrian Day is an excellent book to get started investing in commodities. Adrian explains investing in everything from gold to copper to oil, in easy-to-read, plain English. I highly recommend this book.

Jim Rogers' older book, Hot Commodities, is also an easy-to-read book on commodity investing.

Another excellent (though much more dense) new book is The Quest: Energy, Security, and the Remaking of the World by Daniel Yergin. Yergin wrote the definitive book on the oil industry, The Prize. This new book doesn't give specific investment advice, but it does bring you up to speed.

Second, I personally like to follow what the best investors in natural resources are up to – guys like Rick Rule, Eric Sprott, and Jim Rogers. These guys know these markets well, they're very smart... And they're easy to learn from. I just look for interviews online from the masters. (You can find many of them on The Daily Crux.)

I'm no expert in commodities. I don't want to be. Instead, when I believe the time might be right, I seek out guys like these, who have consistently made big money in that field and figure out what they're doing now.

Lastly, in case I'm wrong, I always have an exit plan... And I always cut my losses early. To improve my odds, I prefer to wait until the sentiment gets terrible as it did a few weeks ago... and then wait for an uptrend. THEN I get in.

This time around, I am trading it the same way I suggested trading Germany... with 15% downside risk and 100%-plus upside potential. I like those risk-and-reward characteristics. If my investments fall below their recent lows, I got the trade wrong. I'll exit then.

In sum, before you invest in commodities...

• Get the background... Read those books.
• When you're ready to buy, figure out what the best in the business are doing and mimic them.
• Have an exit strategy. Know when to cut your losses if you're wrong.

Two weeks ago, it felt like a bottom in commodities, so I bought. So far, so good.

Want to try that yourself? You can. Just follow those three simple steps.

Good investing,

Steve

How to Be a Great Commodities Investor

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