Etikett: IEA

Volatility Makes a Comeback

ETFSeCuritiesVolatility Makes a Comeback

ETFS Multi-Asset Weekly Volatility Makes a Comeback

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Highlights

Oil drops another 10% as the IEA revises 2015 outlook down.

European stocks oscillate in response to mixed news.

FOMC in focus as US dollar rally continues unabated.

With the political situation in Greece remaining precarious and falling oil prices changing the world order, perception of risk is rising. The Chinese domestic equity market ended the week up close to 2%, despite a 5% fall on Tuesday in a particularly unstable week. Position-squaring and reduced liquidity going into year-end is likely to contribute to market volatility, but also likely to leave investors flush with funds to invest at the start of 2015. Gold and silver, traditionally seen as defensive, hedge assets rose last week amidst the instability. The Federal Open Market Committee’s last meeting for 2014 will be closely watched for cues on policy tightening to come in 2015.

Commodities

Oil drops another 10% as the IEA revises 2015 outlook down. WTI fell below US$60/bbl last week while Brent is following close behind, after the International Energy Agency (IEA) announced it expects prices to remain low on weak demand and large supplies. Although price weakness is likely to continue through the first half of 2015, continued economic growth in the US and China, combined with a reduction in oil supply, will eventually bring the oil market back to balance in with prices returning to trade above the US$70/bbl level. We believe the reduced demand forecasts from OPEC are a precursor to supply cuts. At these prices, close to 20% of crude oil and condensates production from the United States are unprofitable according to the EIA. Meanwhile, silver rose 3.4% on tighter supply prospects in 2015. While silver stocks remain elevated, they have fallen by 4% since the beginning of October. We expect industrial demand to rise and buttress price action over the next few months as the recovery in the US and China gains momentum.

Equities

European stocks oscillate in response to mixed news. The EURO STOXX 50® Investable Volatility Index ended the week up 13% after a turbulent week. A report outlining strong German factory orders prompted a rally in European stocks. These gains were quickly erased following an announcement made by Antonis Samaras, the Greek prime minister which stated that voting for a new president would commence this week, casting doubt over the political future of the nation. Energy related stocks have suffered as oil marches lower as illustrated by the -10.7% fall in the Solactive US Energy Infrastructure MLP Index. The FTSE 100 was dragged lower last week by the poor performance of mining stocks, falling -3.3% as China revealed the biggest fall in imports in eight months. The report confirmed growing fears that the domestic demand is weak in the world’s largest consumer of industrial metals.

Currencies

FOMC in focus as US dollar rally continues unabated. We expect the US Dollar to remain on an upward trajectory during 2015, as the economic recovery prompts the Federal Reserve to begin to tighten policy in Q2. We expect that a large balance sheet for the Fed does not preclude rate hikes and that small and measured rate increases can be a signalling mechanism to allow the central bank to warn the market that stimulus will be gradually removed as the recovery continues to absorb spare capacity. Meanwhile, the surprise rate cut by the Norwegian central bank, coupled with the continued weakness in oil prices has been detrimental for the Norwegian Krone. We expect that the deflationary impact of lower oil prices will begin to fade and that the negative impact of weaker oil prices on the Norwegian external balance should also start to diminish as crude recovers.

For more information contact:

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E  info@etfsecurities.com

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This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (”FCA”).

Investments may go up or down in value and you may lose some or all of the amount invested.  Past performance is not necessarily a guide to future performance. You should consult an independent investment adviser prior to making any investment in order to determine its suitability to your circumstances.

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Transient Weakness in Oil Prices

Transient Weakness in Oil Prices

Transient Weakness in Oil Prices Oil prices fell sharply last week after OPEC decided not to cut production.

While members of the oil cartel acknowledged that prices will remain weak unless production is curtailed, OPEC is not willing to bear the burden of such a decision alone.

We remain positive on oil in the long-term, but believe oil prices will remain under pressure until production is reduced.

WTI crude and Brent are now trading over 30% below the US$100/bbl level that is considered a “fair price” by most OPEC producers and that has historically been defended by OPEC. While weak global demand for oil and distillates combined with ample global supply of crude has weighed on both Brent and WTI prices over the past few months, OPEC inaction contributed to push oil prices below US$70/bbl.

Although OPEC resisted calls to cut production last week, highlighting the need for oil prices to find a new equilibrium, we believe the cartel will eventually have to reduce supply to help stabilise global oil prices. The cartel jointly produces approximately 40% of global oil output. While the US is gaining an increasing share of global output (by displacing oil imports through its own production) and Russia remains a formidable player, we believe it is too early to write off OPEC as an irrelevant cartel when it comes to setting global prices.

Key in the decision not to cut production was the split between OPEC and non-OPEC producers. Over the past few years, non- OPEC countries, particularly the US, have seen the majority of the growth in oil production, progressively taking market share away from OPEC countries. With the US not likely to cut its shale production at this stage, OPEC members are unwilling to take the burden alone.

OPEC has historically played a fundamental role in keeping oil prices above US$100/bbl but shale oil might have changed the shape of the industry permanently. Oil productivity and costs vary considerably across different shale formations (see chart opposite), with striking variances within areas of the same formation. While the marginal cost of production of oil as measured by the 90th percentile of the cost curve of the 50 largest oil and gas companies was estimated to be around US$92/bbl in 2011 (see chart on page 2), shale oil has become increasingly cheaper to produce. The IEA reckons 82% of crude oil and condensates production from the United States is still profitable at a price of US$60/bbl or lower

However, the majority of OPEC countries are estimated to require oil prices of at least US$90-US$100/barrel to balance their government budgets. While these countries can run budget deficits, the appetite to do so will wear thin as the cost of financing starts to increase. We believe that last week’s inaction increases the need for large cut at the June 2015 OPEC meeting.

Although price weakness is likely to continue through the first half of 2015, continued growth from the US and China, combined with a reduction in oil supply, will eventually bring the oil market back to balance with prices returning to trade around the US$90/bbl level. In the meanwhile, we deem appropriate to revise down our short/medium-term targets for WTI and Brent from US$105/bbl to US$70/bbl and from US$110/bbl to US$75/bbl as OPEC’s decision of not cutting production will continue to put pressure on prices. Once we start to see production cuts we expect WTI to move towards US$90/bbl and Brent towards US$95/bbl.

IMPORTANT INFORMATION

This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (“ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (“FCA”).
Investments may go up or down in value and you may lose some or all of the amount invested. Past performance is not necessarily a guide to future performance. You should consult an independent investment adviser prior to making any investment in order to determine its suitability to your circumstances.

The information contained in this communication is for your general information only and is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision. Historical performance is not an indication of future performance and any investments may go down in value.

This communication may contain independent market commentary prepared by ETFS UK based on publicly available information. Although ETFS UK endeavours to ensure the accuracy of the content in this communication, ETFS UK does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data. Where ETFS UK has expressed its own opinions related to product or market activity, these views may change. Neither ETFS UK, nor any affiliate, nor any of their respective, officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this communication or its contents.

ETFS UK is required by the FCA to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction. No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit.

This communication is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares or securities in the United States or any province or territory thereof. Neither this communication nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.

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OPEC under Pressure as Oil Prices Remain Below US$80/bbl

OPEC under Pressure as Oil Prices Remain Below US$80/bbl

ETFS Research Note -OPEC under Pressure as Oil Prices Remain Below US$80/bbl

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Key highlights

Oil prices have fallen by over 20% since the end of August, as OPEC is alleged to have started a price war to maintain its market share in light of the rapid growth of shale oil in the US in recent years.

Ultimately, the key to greater support in oil prices lies with OPEC and we believe that the oil cartel, which has been in existence since 1960, will not fall apart and will eventually commit to cutting back on oil production.

While US production is abundant, with oil production at multi-decade highs there is little potential for US crude exports in the near-term, capping the negative impact the over-supply in the US has on global prices.

WTI crude and Brent are now trading over 20% below the US$100/bbl level that is considered a “fair price” by most OPEC producers and that has historically been defended by the OPEC. While weak global demand for oil and distillates combined with ample global supply of crude has weighed on both Brent and WTI prices over the past few months, OPEC inaction contributed to push oil prices below US$80/bbl. OPEC has historically played a fundamental role in keeping oil prices above US$100/bbl. However, OPEC members entered a price war in October, selling their oil at a discount in Asia and the US order to retain their market share.

The key to greater support in oil prices lies with OPEC. According to OPEC’s Secretary General, US shale oil.  producers will be the most hurt by persistently low oil prices while OPEC will be broadly unaffected. While different oil fields have different breakeven costs, most US shale oil, which accounts for most of the global oil production growth over the past few years, has a breakeven price in the range of US$60- US$80. According to the IEA, 82% of crude oil and condensates production from the United States has a breakeven price of US$60/bbl or lower. However, the majority of OPEC countries are estimated to require oil prices of at least US$90-US$100/barrel to balance their government budgets.

Hence, we believe it is a matter of time before OPEC start to reduce supply and that could happen as early as November 27, when OPEC holds its next meeting. There appear to be a clear split between Gulf OPEC members and the remaining countries in terms of cutting oil production to sustain oil prices. Saudi Arabia and other Gulf members have publicly opposed a production cut, while Libya, Venezuela and Ecuador have urged oil price support ahead of the next OPEC meeting. Currently OPEC produces 30.5mn barrels per day,
0.5mn barrels above the current production ceiling of the organisation. Most non-Gulf members are calling for Saudi Arabia to bear the brunt of the supply reduction as they allege that is where the majority of the overproduction comes from.

With the future of the Organization of the Petroleum Exporting Countries at risk, we believe Saudi Arabia will have to cut production in order to soothe the increasing restlessness of the other OPEC members. We reiterate our positive view on both Brent and WTI and believe prices will recover from current low levels.

For more information contact:

ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E  info@etfsecurities.com

Important Information

This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the ”FCA”).

When being made within Switzerland, this communication is for the exclusive use by ”Qualified Investors” (within the meaning of Article 10 of Section 3 of the Swiss Collective Investment Schemes Act (”CISA”)) and its circulation among the public is prohibited.

The information contained in this communication is for your general information only and is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision. Historical performance is not an indication of future performance and any investments may go down in value.

This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares or securities in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.

This communication may contain independent market commentary prepared by ETFS UK based on publicly available information. Although ETFS UK endeavours to ensure the accuracy of the content in this communication, ETFS UK does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data. Where ETFS UK has expressed its own opinions related to product or market activity, these views may change. Neither ETFS UK, nor any affiliate, nor any of their respective, officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents.

ETFS UK is required by the FCA to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction.  No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit.

Rousseffs seger i Brasiliens val är det minsta problemet, det är oljepriset

Rousseffs seger i Brasiliens val är det minsta problemet, det är oljepriset

Under söndagen vann den sittande presidenten, Dilma Rousseff, mot senator Aecio Neves i det brasilianska valet. Valet har beskrivits som det jämnaste sedan 1985, och Rousseff vann med 52 procent mot Neves 48 procent i ett val där finansmarknaderna tydligt visat att de föredrar vem som helst utom just Rousseff som president. Rousseffs seger i Brasiliens val är det minsta problemet, det är oljepriset.

Under måndagen kom den amerikanska investmentbanken Goldman Sachs med en ny prognos för oljepriset som kan komma att visa sig vara ett ännu större problem för Brasilien än Dilma Rousseff. Om Goldmans Sachs nya prognos för oljepriset, mer korrekt priset på Brent Crude, som enligt den amerikanska investmentbanken kommer att hamna på 85 USD under 2015 och 90 USD på lång sikt så kommer både Brasilien och det brasilianska oljebolaget Petrobras (PBR) att få stora problem.

Petrobras har investerar tiotals miljoner USD av lånade pengar för att utveckla sina djuphavsfält och utvinna olja från dessa. Enbart Libra, Brasiliens största oljefält kommer enligt det franska oljebolaget Total kosta 80 miljarder dollar att utveckla färdigt. Enligt en annan amerikansk investmentbank, Morgan Stanley, ligger marginalkostnaden för att utvinna olja från dessa oljefält i spannet 75 till 100 USD per fat.

Ett lägre oljepris kan antagligen komma att leda till att en del av Petrobras förluster minskar, men nettoeffekten bör bli negativ. Den schweiziska banken UBS gör bedömningen att om Brentoljan handlas i ett prisintervall på 80 till 90 USD per fat så sjunker substansvärdet för Petrobras med mellan 20 och 40 procent.

Oljepriset

Om oljepriset faller långsiktigt och om marknaden bestämmer sig för att oljepriset fortsätter att handlas till låga nivåer så kommer incitamenten till att utveckla och prospektera nya fyndigheter att minska väsentligt. IEA har tidigare i en prognos förutspått att Brasilien skall svara för 16 procent av tillväxten av oljeproduktionen av de länder som står utanför OPEC under perioden 2012 till och med 2020. Med de nya prognoserna är det sannolikt att anta att IEA kommer att få revidera denna prognos.

iShares MSCI Brazil Capped ETF EWZ

 

Den nya prognosen kommer sannolikt också att leda till att hela den brasilianska ekonomin, inte enbart oljeindustrin drabbas negativt. En av de mest kända börshandlade fonderna som spårar utvecklingen på den brasilianska aktiemarknaden är iShares MSCI Brazil Capped ETF EWZ men det finns ett antal ytterligare, vilka vi beskriver nedan.

Brasilien ETFer – En genomgång

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Majoriteten av ETF:erna följer indexet MSCI Brasilien. Indexet består av cirka 65 bolag precis som Ibovespa. Lyxors ETF är den enda ETF:en som följer Ibovespa direkt.

Företagen som ingår i Indexet är stora och medelstora företag, baserat på det samlade värdet av ett företags tillgängliga aktier i jämförelse med andra företag. Syftet med Indexet är att det ska representera 85 % av de tillgängliga aktierna inom varje industrisektor på den brasilianska marknaden. Ett bolags viktning i Indexet är beroende av dess relativa storlek. Indexet beräknas baserat på total nettoavkastning, vilket innebär att alla vinster och utdelningar från företagen återinvesteras i aktierna efter skatt. Indexet granskas och ombalanseras minst en gång per kvartal.