OPEC Oil Production Falls in September, Survey Shows

Oct. 1 (Bloomberg) -- The Organization of Petroleum Exporting Countries trimmed production for a second consecutive month in September, as some members moved closer to production targets agreed to last year, a Bloomberg News survey showed.

Production averaged 28.395 million barrels a day last month, down 50,000 barrels from August, led by declines by Iraq, Saudi Arabia and Angola, according to the survey of oil companies, producers and analysts.

Excluding Iraq, which doesn’t have a quota or participate in output cuts implemented by the organization last year, the group’s production fell 10,000 barrels a day from the previous month to 26.045 million, 1.2 million more than the target.

“What it’s telling you is they’re pretty comfortable with this $65 to $75 price range,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “They’ve done a fantastic job of engineering it, primarily because the Gulf Cooperation Council countries are ready to sacrifice market share to get the price to where they want it to be.”

The GCC includes four OPEC members, Saudi Arabia, Kuwait, the United Arab Emirates and Qatar. Together, they are responsible for 74 percent of OPEC’s output reductions since 2008, based on the latest estimates. Saudi Arabia, Kuwait and Qatar were the only OPEC members to produce within their targets last month.

Oil has traded between $65 and $75 since July 31.

Crude Falls

Oil for November delivery rose 21 cents, or 0.3 percent, to settle at $70.82 a barrel at 2:54 p.m. on the New York Mercantile Exchange. Prices rose the most in almost six months yesterday, climbing $3.90, or 5.9 percent, to $70.61 a barrel. They have more than doubled from a four-year low of $32.40 a barrel reached at the end of last year.

OPEC members agreed in September 2008 that the 11 countries with quotas would trim output by 4.2 million barrels a day to 24.845 million. Oil ministers meeting last month in Vienna left the target unchanged on an expectation that the global economy would recover and keep demand and prices up.

The Vienna meeting marks the third time this year that OPEC decided against changing production levels. The group’s next gathering is Dec. 22 in Luanda, Angola.

Output cuts have left OPEC with 6.105 million barrels a day of spare capacity, the survey showed. Saudi Arabia can increase production by 2.785 million barrels, the most of any member.

Excess Capacity

Iraqi oil output fell 40,000 barrels to 2.35 million barrels a day in September, the biggest decline of any OPEC member, according to the survey.

Saudi Arabia, the world’s top oil exporter and OPEC’s biggest producer, pumped 8.015 million barrels of crude a day, down 25,000 barrels from the previous month. The decline was the biggest among the members participating in the output cuts. Production was 36,000 barrels a day below the kingdom’s quota of 8.051 million.

Kuwaiti output fell 15,000 barrels a day to 2.185 million, according to the survey. Output was 37,000 barrels a day lower than the country’s quota.

Qatar, the second-smallest producer in the group, pumped 720,000 barrels a day in September, down 3,000 barrels from August and 11,000 barrels below its target.

Exceeding Targets

The other eight OPEC members with quotas exceeded their production targets, which have been in place since Jan. 1. Nigeria and Venezuela had the biggest increases last month, followed by Iran and the United Arab Emirates.

Nigeria’s output rose 25,000 barrels a day to an average 1.805 million. The country exceeded its target by an average 132,000 barrels a day. The sweet, or low-sulfur, crude oil producer is recovering from summer supply disruptions amid an ongoing cease-fire by the country’s main rebel group, the Movement for the Emancipation of the Niger Delta, or MEND.

Venezuela also boosted production by 25,000 barrels a day to 2.23 million barrels. Its output was 244,000 above its target.

Iranian output rose 20,000 barrels a day to 3.78 million in September, the survey showed. The country, OPEC’s second-biggest producer, pumped an average 444,000 barrels a day above its target, the most of any member.

The UAE raised production by 20,000 barrels a day to 2.27 million barrels. That put it about 47,000 barrels a day above its output target.

Refiners May Violate Loan Terms as Fuel Demand Stalls

Oct. 1 (Bloomberg) -- U.S. refiners may fail to meet financial requirements of their credit agreements later this year as slumping fuel demand erodes the profitability of making gasoline and diesel.

Independent refiners, which don’t have oil and natural-gas wells to fall back on, are being pushed to the brink of violating performance covenants of their loans, said Scott Van Bergh at Bank of America Merrill Lynch in New York. Van Bergh, the bank’s energy banking chief for the Americas, declined to comment on specific companies. Bankers and analysts say Western Refining Inc., Tesoro Corp. and Alon USA Energy Inc. are among the fuel makers at risk of failing to meet debt terms.

Violations of covenants, which often include ratios related to earnings in the past 12 months, could lead to higher fees or collateral requirements, according to Standard & Poor’s. So- called crack spreads, the gap between oil costs and fuel prices, are narrowing as the recession cuts demand. Third-quarter profits at independent U.S. refiners dropped 85 percent from a year earlier, analyst estimates compiled by Bloomberg showed.

“I think there are certainly refiners in the sector that have had, and may continue to have, covenant issues in a stressed crack-spread environment,” Van Bergh said. “We will continue to work with companies on a case-by-case basis to get them through this period of time.”

Covenant Modifications

Bank of America’s stance may be typical. Lenders will probably modify covenants to help refiners comply, said Paul Harvey, an analyst at Standard & Poor’s in New York. He said he doesn’t expect banks to close credit lines, cutting off access to the cash refiners need to feed their plants with crude oil.

Banks may impose more restrictions on credit for those purchases, said Darin Schmalz, a director at Fitch Ratings in Chicago. Banks may later force borrowers to use cash to cut debt rather than for other purposes, he said.

Western, Tesoro and Alon shares are trading more than 75 percent below 2007 highs -- 91 percent in Western’s case -- on the New York Stock Exchange. Western fell 37 cents, or 5.7 percent, to $6.08 today, and Tesoro slid 72 cents to $14.26. Alon dropped 40 cents to $9.53.

Tesoro has 14 hold and 5 sell ratings from analysts. None rates the shares a buy. Western has 1 buy, 5 hold and 2 sell ratings. Alon has 3 holds and 3 sells.

Western ‘Very Comfortable’

Tesoro and Western notes are trading at or above 94 cents on the dollar, up from 85 cents as recently as July, rising amid a jump in prices for bonds rated below investment grade.

El Paso, Texas-based Western said its lenders amended its credit facilities in June 2008, eliminating covenant requirements for one quarter. In this year’s second quarter, Western renegotiated its covenants and issued 14 million shares of stock and $700 million in bonds.

Western is “very comfortable with where we are and will continue to be opportunistic in further increasing our flexibility as it makes sense,” according to an e-mailed statement by the refiner. Bank of America, which serves as agent for Western’s term loan, declined to comment on the credit agreement.

Western posted losses in two of the past three quarters. When it reports results for the current period, its second-most profitable quarter on record will no longer be included in its results for the past 12 months.

Tesoro, Alon

“As we roll through into the second half of this year and lose those strong quarters is where the issue is,” said Ann Kohler, an analyst at Caris & Co. in New York. “Based on my current analysis of their earnings on the balance of this year and into early next, they will breach their debt covenants in the first quarter.”

San Antonio-based Tesoro and Alon, based in Dallas, also had two of their best quarters in last year’s second half. That means they will lose the results propping up their 12-month earnings by early next year, said Jim Byrne, an analyst at BMO Capital Markets in Calgary.

Alon said it’s paying down debt to remain in compliance with terms of a loan it took out to acquire a plant in 2008. “We’re still de-levering,” Alon CEO Jeff Morris said in an interview.

The company has twice amended its $400 million revolving credit facility, used to purchase crude at its Krotz Springs, Louisiana, refinery. The second time, in April, parent Alon Israel Oil Co. provided a $25 million letter of credit, according to a company filing.

Credit Requirements

Bank of America is lead arranger for Alon’s credit line. Bank spokesman John Yiannacopoulos declined to comment on the matter.

Tesoro, which operates refineries in the Western U.S., has two key covenants on its $1.81 billion revolving credit facility, according to company filings. One stipulates that the company must keep a minimum level of net worth. The other requires the company to keep a level of earnings that exceeds a measure of financing expenses.

Lynn Westfall, Tesoro’s chief economist and spokesman, declined to comment on loan covenants.

Tesoro and its lenders modified the credit line earlier this year, according to a filing with the U.S. Securities and Exchange Commission. “They’re increasing debt limits, so that gives them more breathing room,” said Mark Sadeghian, another Fitch Ratings director in Chicago.

Justin Perras, a spokesman for JPMorgan Chase & Co., agent for Tesoro’s credit line, declined to comment.

Harvey, the Standard & Poor’s analyst, said banks are working with refiners rather than demanding immediate payment of their loans.

“Banks have been willing to grant amendments or waivers to covenants, understanding that margins are extremely volatile right now,” Harvey said. “If the banks really wanted to play hardball, they could require them to repay loans.”

FKLI Commentary on 02/10/09

FKLI Sep Futures contract rebound 3 points higher to settle at 1209 levels as compare to previous trading session to with a total of 3,628 lots traded in the market. FKLI was traded higher during trading sessions despite most of the regional indices were traded lower but falls slightly due to profit taking activities.

Technically, FKLI manage to rebound 38.1% Fibonacci resistance levels at 1213 regions. Based on our technical view, our opinion suggests FKLI would trade lower in coming trading sessions provided resistance levels at 1213 and 1220 were not violated during trading sessions. Traders were advice to hold short position in the coming trading sessions while be cautious around support levels at 1206 and 1200 regions.

FCPO Commentary on 02/10/09

CPO 3rd month Dec futures contract traded RM10 higher as compare to previous trading sessions to close at RM2115 with a total of 3,870 lots traded in the market. CPO price were trading within tight range again despite crude oil and soybean oil were traded firm during overnight trading sessions.

Technically, CPO price still traded within tight range despite manage to break up from symmetric triangle in the hourly chart. Based on our technical view, our opinion suggests CPO price would likely to trade higher in the coming trading sessions. Traders were advice to hold long position in the coming trading sessions provided support levels at RM2098 and RM2070 must not being violated. Resistance levels were seen at RM2150 and RM2188 regions.

Crude Oil Falls on Concern U.S. Economic Recovery May Stall

Oct. 1 (Bloomberg) -- Crude oil in New York fell as traders booked profits from yesterday’s rally on concern the pace of fuel demand recovery in the U.S., the biggest energy-consuming nation, may stall.

Oil slipped below $70 a barrel after an unexpected drop in U.S. business activity and as companies cut more jobs than estimated. Prices rallied 5.9 percent yesterday, the most since April 2, after the Energy Department posted a surprise drawdown in gasoline stockpiles.

“Yesterday seemed like a rather disproportionate rise,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “There’s a lot of data out in the next couple of days in the U.S. that would really affect perceptions of the outlook and have a bearing on the movement in oil prices.”

Crude oil for November delivery fell as much as 72 cents, or 1 percent, to $69.89 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $70.02 a barrel at 12:25 p.m. in Singapore. Futures have gained 57 percent this year.

The Institute for Supply Management-Chicago Inc.’s business barometer slid to 46.1, trailing the most pessimistic estimate from economists. Companies in the U.S. cut September payrolls by a larger-than-forecast 254,000 jobs, a report from ADP Employer Services showed, indicating the labor market may be slow to recover.

“The poor economic news suggests oil should not go too much higher in price because the U.S. economy is not improving as quickly as hoped,” Mike Sander, an investment adviser at Sander Capital in Seattle, said in an e-mail. “The economy is still in dire shape.”

Gasoline Drawdown

U.S. gasoline inventories fell 1.7 million barrels to 211.5 million in the week to Sept. 25, the Energy Department said yesterday. Stockpiles were forecast to rise 1 million barrels, according to the median of estimates in a Bloomberg News survey of analysts.

Crude oil supplies climbed 2.8 million barrels to 338.4 million, the report showed. Distillate stockpiles, which include heating oil and diesel, rose 323,000 barrels to 171.1 million. That’s a sixth weekly increase even as refinery output and imports dropped.

“While gasoline demand looks fine, distillate demand remains very weak, with an 11.6 percent year-on-year decline for September-to-date,” analysts at Barclays Capital, led by Paul Horsnell, said in an overnight report.

Oil in New York rose 1 percent in the three months to yesterday, a third quarterly increase.

“We had a very sharp reaction given data that had both positive and negative aspects,” said Commonwealth Bank of Australia’s Moore. “We’re essentially still in a range of $65 to $75.”

Equities Decline

U.S. stock markets fell following the Chicago business activity report. The Standard & Poor’s 500 Index lost 0.3 percent to 1,057.08 in New York, while the Dow Jones Industrial Average also slipped 0.3 percent to 9,712.28.

Asian shares mirrored the decline on concern the region’s economic recovery may falter. The MSCI Asia Pacific Index lost 1.1 percent to 116.72 at 12:32 p.m. in Tokyo.

China’s manufacturing expanded in September at the fastest pace in 17 months on stimulus spending and this year’s record growth in new loans. The country, Asia’s largest oil consumer, marks 60 years of Communist Party rule today.

Brent crude oil for November settlement fell as much as 64 cents, or 0.9 percent, to $68.43 a barrel on the London-based ICE Futures Europe exchange. The contract traded at $68.51 a barrel at 12:25 p.m. Singapore time. Yesterday, it rose 5.5 percent, the steepest increase since Sept. 16, to settle at $69.07 a barrel.

Oil Declines on Concerns U.S. Economy Struggling to Recover

Oct. 1 (Bloomberg) -- Crude oil in New York fell after an unexpected drop in U.S. business activity and as companies cut more jobs than estimated, adding to concerns over the pace of revival in fuel demand in the biggest energy-consuming nation.

Crude oil pared some of yesterday’s 5.9 percent gain after the Institute for Supply Management-Chicago Inc.’s business barometer trailed economists’ estimates. Companies in the U.S. cut payrolls by a greater-than-forecast 254,000 jobs, a report from ADP Employer Services showed, indicating the labor market will be slow to recover.

“The poor economic news suggests oil should not go too much higher in price, because the U.S. economy is not improving as quickly as hoped,” Mike Sander, an investment adviser at Sander Capital in Seattle, said in an e-mail. “The economy is still in dire shape.”

Crude oil for November delivery declined 46 cents, or 0.7 percent, to $70.15 a barrel in electronic trading on the New York Mercantile Exchange at 10:25 a.m. Sydney time. Yesterday, the contract rose $3.90 to settle at $70.61, the biggest one-day gain since April 2.

Crude oil increased 1 percent in the three months ending yesterday, a third consecutive quarterly gain. The price averaged $68.24 a barrel in the quarter, the highest in a year.

Inventories of crude oil climbed 2.8 million barrels to 338.4 million last week, the Energy Department said yesterday. Supplies were forecast to increase by 2 million barrels. Refinery utilization dropped 1 percentage point to 84.6 percent, the lowest in more than a month. The rate was forecast to fall 0.5 percentage point.

Stocks Decline

U.S. stocks fell after the business activity report. The Standard & Poor’s 500 Index lost 0.3 percent to 1,057.08 in New York. The Dow Jones Industrial Average slipped 29.92 points, 0.3 percent, to 9,712.28. The dollar traded at $1.4654 versus the euro at 8:55 a.m. in Tokyo from $1.4640 in New York yesterday.

The Nikkei 225 Stock Average declined 0.7 percent to 10,061.41 as of 9:03 a.m. in Tokyo. The broader Topix index fell 0.6 percent to 904.30. Australia’s benchmark S&P/ASX 200 Index gained 4.1 points at 10:29 a.m. Sydney time.

Oil gained yesterday after the Energy Department report showed an unexpected decline in supplies of gasoline. Stockpiles of the motor fuel fell 1.66 million barrels in the week ended Sept. 25, the report said. Inventories were forecast to gain 1 million barrels, according to the median of estimates in a Bloomberg News survey.

Brent crude oil for November settlement dropped 17 cents to $68.90 a barrel on the London-based ICE Futures Europe exchange at 10.15 a.m. Sydney time. Yesterday, the contract rose $3.58, or 5.5 percent, to settle at $69.07.

Dollar Falls Versus Euro as Recovery Signs Spur Risk Demand

Oct. 1 (Bloomberg) -- The dollar declined against the euro for a second day as growing evidence of the global economic recovery stokes demand for higher-yielding assets.

The greenback extended its two-quarter decline against Europe’s single currency on speculation a report today will show China’s manufacturing expanded for a fourth month. The yen retreated against the euro after the International Monetary Fund cut its projection for writedowns on loans and investments.

“China is showing steady signs of growth, boosting demand for assets in emerging markets and weighing on the dollar,” said Toshiya Yamauchi, a Tokyo-based manager of the foreign- exchange margin trading department at Ueda Harlow Ltd. “The dollar will continue to be sold for a while.”

The dollar traded at $1.4654 per euro at 8:55 a.m. in Tokyo from $1.4640 in New York yesterday. The euro was at 131.77 yen from 131.33 yen. The dollar bought 89.91 yen from 89.70. It fell as low as 88.24 on Sept. 28, the weakest level since January.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the U.S. currency versus six counterparts including the euro and yen, fell 0.53 percent to 76.712 yesterday. It traded at 76.654 today.

Economists in a Bloomberg News survey said China’s Purchasing Managers’ Index gained to 55 in September from 54 in August. The Federation of Logistics and Purchasing is set to report the data at 9 a.m. today in Beijing.

Tankan Survey

The Bank of Japan’s Tankan survey today showed an index of confidence among large manufacturers improved to minus 33 from minus 48 in June, matching the median estimate of economists in a Bloomberg News survey. A negative number means pessimists outnumber optimists.

The dollar’s share of global currency reserves fell in the second quarter to 62.8 percent, from 65 percent in the first three months of the year, an IMF report showed yesterday. The euro’s share rose to 27.5 percent from 25.9 percent.

The IMF cut its projection for global writedowns on loans and investments by 15 percent to $3.4 trillion, citing in its semiannual report improvements in credit markets and signs of economic growth.

Tight credit, low inflation and slack demand for labor and products mean the Federal Reserve can keep interest rates at around zero “for an extended period,” Fed Vice Chairman Donald Kohn said in Washington yesterday.

FKLI Commentary on 01/10/09

FKLI Sep Futures contract fall 5.5 points lower to settle at 1202 levels as compare to previous trading session to with a total of 2,769 lots traded in the market. FKLI was traded lower with tight range as regional indices were not much volatile itself during trading sessions.

Technically, FKLI was entirely traded lower during trading session and tested support levels at 1200.5; 100% Fibonacci projection levels. Based on our technical view, our opinion suggests FKLI was likely changed towards south provided resistance levels at 1222 and 1232 were not violated during trading sessions. However, traders were advice to hold short position cautiously around support levels at 1196 and 1189 regions.

FCPO Commentary on 01/10/09

CPO 3rd month Dec futures contract traded marginally RM2 lower as compare to previous trading sessions to close at RM2103 with a total of 8,305 lots traded in the market. Another sideway trading day for CPO price trading despite crude oil and soybean oil electronic trading were traded actively during trading sessions.

Technically, CPO price were traded sideways throughout entire trading session while support level remain at RM2080 region. CPO hourly and daily price chart appears to have a symmetric triangle with support seen at RM2098 and RM2070 regions. Our opinion suggests CPO price would likely to trade higher in the coming trading sessions provided support levels were not violated during trading sessions. Traders were advice to hold long position in the coming trading session while be alert around resistance levels at RM2130 and RM2188 regions.

Palm Oil Poised for 4th Monthly Drop This Year on Supply Gains

Sept. 30 (Bloomberg) -- Palm oil was little changed, heading for its fourth monthly drop this year, amid falling exports and the prospect of a record crop of rival soybean.

The tropical oil has lost 11 percent this month as sales from Malaysia, the second-largest producer, fell 7.8 percent in the first 30 days of this month to 1.23 million tons compared with 1.33 million tons in the same period in August, Intertek, an independent surveyor, said today.

“The fundamentals aren’t looking great for palm oil at the moment,” Wang Aihua, an analyst at Orient Securities Futures in Shanghai, said. “We may see a lift if crude oil moves higher.”

Palm oil for December delivery traded unchanged at 2,102 ringgit ($605) a metric ton on the Malaysia Derivatives Exchange at 12:22 p.m. local time. Futures gained 0.8 percent earlier.

November-delivery soybean oil was little changed at 33.83 cents a pound in after-hours trading on the Chicago Board of Trade at the same time. The contract rose 0.7 percent yesterday.

An overnight freeze in parts of the U.S. Midwest caused little crop damage as farmers hasten the pace of harvesting before rains arrive later this week. An estimated 63 percent of the crop was beginning to drop leaves as of Sept. 27, a sign of maturity before the harvest, compared with 40 percent a week ago, the U.S. Department of Agriculture said yesterday. About 5 percent was harvested, compared with a five-year average of 18 percent, the agency said.

Output of soybeans in the U.S., the world’s largest grower and exporter, will reach a record 3.245 billion bushels this year, the U.S. Department of Agriculture estimated on Sept. 11.

Crude oil was up 0.9 percent at $67.33 a barrel at 12:23 p.m. in Malaysia. Palm oil and its substitute soybean oil often track crude oil as they are used as feedstock for biofuels.

Oil Trades Below $67 as Dollar Rises, Crude Stockpiles Increase

Sept. 30 (Bloomberg) -- Oil traded little changed below $67 a barrel in New York as the dollar rose and an industry-funded report showed an increase in crude supplies in the U.S., the world’s biggest energy consumer.

Oil declined yesterday as a stronger dollar reduced the appeal of commodities as an alternative investment. The American Petroleum Institute reported crude inventories rose 2.76 million barrels last week. A U.S. government report today may also show stockpiles increased.

“The dollar is having an affect,” said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd. in Melbourne. “The fundamental data is quite volatile and people are quite uncertain.”

Crude oil for November delivery traded at $66.64 a barrel, down 7 cents, in electronic trading on the New York Mercantile Exchange at 10:22 a.m. Sydney time. Yesterday, the contract fell 13 cents to settle at $66.71. Oil is poised for a 4.7 percent decline for the three months ending today, the first quarterly drop in three periods.

The Standard & Poor’s 500 Index fell 0.2 percent yesterday in New York, and the Dow Jones Industrial Average lost 0.5 percent. Australia’s S&P/ASX 200 Index advanced 0.2 percent at 10:48 a.m. local time, and Japan’s Nikkei 225 Stock Average climbed 0.3 percent.

The dollar traded at $1.4590 per euro at 9:58 a.m. Sydney time, from $1.4587 yesterday, when it touched $1.4527, the strongest level since Sept. 14.

Rising Supplies

“Part of the reason earlier in the week that oil didn’t fall on the stronger dollar was that it seemed to have fallen to those resistance levels around the $65-a-barrel mark,” Westmore said. “Now that oil is up to the high $60s the dollar is probably having a bit of an effect.”

An Energy Department report scheduled for release today will probably show crude stockpiles rose by 2 million barrels last week, according to the median estimate of 17 analysts surveyed by Bloomberg News. Gasoline and distillate fuel inventories also increased, the survey showed.

Crude inventories rose to 340 million barrels last week, according to the API report. Gasoline supplies decreased 1.72 million barrels to 212.5 million, the report showed.

Also weakening prices, confidence among U.S. consumers unexpectedly fell in September as a rising unemployment rate weighed on households, the New York-based Conference Board said yesterday. The group’s confidence measures of present conditions and its expectations for six months from now declined.

“U.S. confidence came out last night and was a little bit softer than expected and that weighed on the price,” Westmore said. “I think it’s probably going to range around the $70 a barrel mark,” in the short term, he said.

Brent crude oil for November settlement rose 0.2 percent to $65.65 on the London-based ICE Futures Europe exchange at 10:42 a.m. Sydney time. It dropped 5 cents to $65.49 a barrel yesterday.

Gold Gains in New York, Erasing Earlier Loss, as Dollar Eases

Sept. 29 (Bloomberg) -- Gold rose in New York, erasing an earlier loss, as the dollar pared gains, spurring demand for the precious metal as an alternative investment.

The dollar climbed as much as 0.4 percent against a basket of six major currencies before trading little changed. Gold has advanced 12 percent this year, while the greenback fell 5.2 percent against the basket.

“As the dollar starts to weaken and the stock market comes back, gold is finding a base,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.

Gold futures for December delivery rose 30 cents to settle at $994.40 an ounce on the Comex division of the New York Mercantile Exchange. The metal rose as much 0.3 percent and dropped as much as 0.8 percent.

The Standard & Poor’s 500 Index rose was little changed at 2:18 p.m. after earlier dropping as much as 0.5 percent. Gold for immediate delivery gained $1.35 to $992.40 an ounce.

“Gold is looking at the dollar and the stock market for direction,” McGhee said. “At this point, it could drop $25 or rally $25.”

“A hesitancy has emerged among fast money to buy gold due to fears of excess long positioning in futures and concerns about the sustainability of both dollar weakness and the broader trend of risk-asset growth,” John Reade, UBS AG’s head metals strategist in London, said in a report. “We continue to expect a deeper correction in gold and silver in coming weeks.”

Gold is heading for a ninth straight annual gain. Hedge- fund managers and other large speculators increased their bets on rising futures to a record in the week ended Sept. 22, the U.S. Commodity Futures Trading Commission said last week. Net- long positions gained by 1,102 contracts to 236,749 contracts.

Silver for December delivery dropped 1.7 cents to $16.178 an ounce.

Yen Falls for 2nd Day on Speculation Government Will Intervene

Sept. 30 (Bloomberg) -- The yen fell against the euro and dollar on bets Japan will intervene to stem the currency’s gains amid the nation’s fragile economic recovery.

The yen retreated against all 16 major counterparts after Japan’s Finance Minister Hirohisa Fujii yesterday denied speculation he would accept a strong currency. The dollar retreated from near a two-week high against the euro as Asian stocks rose, damping demand for safe-haven currencies.

“As Fujii clarifies his stance on the yen, the bias is for the yen to weaken,” said Toshiya Yamauchi, a Tokyo-based manager of the foreign-exchange margin trading department at Ueda Harlow Ltd. “If the yen were to appreciate further, companies would mount pressure on the government to intervene.”

Japan’s currency dropped to 131.71 per euro as of 9:46 a.m. in Tokyo from 131.40 in New York yesterday. The yen has gained 2.7 percent against the euro this quarter. The yen weakened to 90.26 per dollar from 90.09. It advanced to as high as 88.24 on Sept. 28, the strongest level since Jan. 23. For the quarter, the yen has risen 6.8 percent against the dollar.

The dollar fell to $1.4692 per euro from $1.4587. Yesterday, it touched $1.4527, the strongest level since Sept. 14. The dollar has weakened 3.8 percent against the euro this quarter.

The MSCI Asia Pacific Index of regional shares gained 0.4 percent. Japan’s Nikkei 225 Stock Average rose 0.3 percent.

FKLI Commentary on 30/09/09

FKLI Sep Futures contract rebound 2.5 higher to close at 1207.5 levels as compare to previous trading session to with a total of 3,166 lots traded in the market. FKLI was traded lower during trading sessions despite Dow Jones overnight trading and regional indices were recovered strongly.

Technically, FKLI opened higher in the 1st trading sessions but traded lower after 50% Fibonacci retrace levels at 1213.5 fail to get penetrate and get rested above 78.6% Fibonacci support levels. Based on our technical view, our opinion suggests FKLI is possible to rebound higher provided support levels at 1202 were not violated during trading hours. However, traders were still advice to hold short position in the coming trading sessions as reverse trend pattern is getting likely to form. Resistance levels were seen at 1218 and 1226 regions.

FCPO Commentary on 30/09/09

CPO 3rd month Dec futures contract traded marginally RM2 higher as compare to previous trading sessions to close at RM2105 with a total of 10,516 lots traded in the market. CPO price were sideways due to soybean oil and crude oil electronic trading were traded opposing each other’s direction which directly affect CPO trading directions.

Technically, CPO price were traded sideways throughout entire trading session while support levels at RM2080 region was being tested several times. Based on our technical view, our opinion suggests CPO price would likely to trade higher in the coming trading sessions provided support levels at RM2070 and RM2083 were not violated during trading sessions. Traders were advice to hold long position in the coming trading session while be alert around resistance levels at RM2130 and RM2188 regions.

Palm Oil Drops the Most Since June, Tracking Crude Oil Losses

Sept. 28 (Bloomberg) -- Palm oil tumbled the most in more than three months after a leading industry buyer said prices must slump 13 percent from current levels to stoke demand for food and fuel applications and as crude oil fell.

The commodity needs to decline to 1,900 ringgit ($547) a metric ton for demand to rebound, Dorab Mistry, director of Godrej International Ltd., said yesterday in Mumbai. Godrej is one of the biggest buyers of palm oil in India, the second- largest consumer of edible oils.

“Prices need to become more competitive if biodiesel usage is to expand,” Mistry, who has traded edible oils for three decades, said at a conference.

Palm oil for December delivery in Malaysia, the second- biggest producer, dropped 3.8 percent to 2,103 ringgit a ton on the Malaysia Derivatives Exchange. That was the biggest drop since June 22.

Prices of the tropical commodity, which competes directly with soybean oil for use in cooking and biodiesel, have climbed 24 percent this year on concern there may be a global oilseed shortage. Higher crude prices and speculation the global economy was recovering also boosted futures.

Crude oil slipped to less than $66 a barrel in New York today as declines in Asian equities raised concern a recovery in fuel demand may stall.

November-delivery crude oil, which slumped 8.9 percent last week, dropped as much as 0.9 percent to $65.41 a barrel in Singapore. It was 0.5 percent lower at $65.69 at 6:29 p.m. Singapore time.

Palm oil traded in Dalian for May delivery dropped 1.5 percent to 5,730 yuan ($839) a ton, a sixth day of decline. China is the world’s largest consumer of edible oils.

Weak Trend

“We concur with Dorab’s expectations for weaker crude palm oil prices till end-2009,” a UOB Kay Hian research report said today. “We expect the weak price trend to continue into March or April 2010,” as supply improves during the seasonally weakest quarter for demand in the first quarter, it added.

The outlook for palm oil was based on an assumption that crude oil will trade at between $65 and $80 a barrel until the spring of 2010, Mistry said. He correctly predicted on Aug. 4 that palm oil would drop to 2,100 ringgit a ton as inventories expanded on increased production.

Malaysia’s palm oil production gained 0.2 percent in August on month to 1.49 million tons, the highest level since a record set in November last year, according to the Malaysian Palm Oil Board on Sept. 10. That helped lift stockpiles to a six-month high of 1.42 million tons, as exports fell for the first time in four months.

Still, palm oil may reach $1,000 a ton if a global economic recovery pushes crude oil up to $95 a barrel, James Fry, managing director of LMC International Ltd., which tracks the world’s main oilseeds, said at the same conference.

“Biofuels have created a link between mineral and vegetable oil prices,” Fry said.

Oil Rises a Third Day as Recovery Optimism Sparks Equities Gain

Sept. 29 (Bloomberg) -- Crude oil advanced for a third day in New York on optimism about the prospects for an economic recovery in the U.S., the world’s biggest energy consumer.

Oil extended gains after U.S. equities increased the most in five weeks yesterday as takeovers in the drug and technology industries added to evidence that mergers and acquisitions are rebounding from the slowest pace in six years. Japanese and Australian stock futures rose today after Asian equities posted their longest stretch of declines in almost three months.

“Oil received price support from the rally in equities,” said Mike Sander, an investment adviser at Sander Capital in Seattle. “For oil to trade lower in price we are going to have to see the euro drop in value,” reducing the appeal of commodities as an inflation hedge, he said.

Crude oil for November delivery gained 45 cents, or 0.7 percent, to $67.29 a barrel in electronic trading on the New York Mercantile Exchange at 9:49 a.m. Sydney time. Yesterday, the contract rose 82 cents, or 1.2 percent, to settle at $66.84. Prices have gained 50 percent since the start of the year.

The Standard & Poor’s 500 Index added 1.8 percent to 1,062.98 in New York yesterday, snapping a three-day losing streak. The Dow Jones Industrial Average gained 124.17 points, or 1.3 percent, to 9,789.36.

The Nikkei 225 Stock Average added 0.8 percent to 10,087.61 as of 9:04 a.m. in Tokyo. Australia’s benchmark stock index, the S&P/ASX 200 Index, rose 0.62 percent at 10:05 a.m. in Sydney.

Cold Winter

The dollar traded at $1.4630 per euro at 8:30 a.m. in Tokyo, from $1.4622 yesterday.

The U.S. northeast, the country’s largest market for heating oil, may have the coldest winter in a decade because of a weak El Nino, a warming current in the Pacific Ocean, according to Matt Rogers, a forecaster at Commodity Weather Group, in a Bloomberg Television interview from Washington.

Still, ample U.S. oil supplies may curb gains in prices. Stockpiles are 9 percent higher than the five-year average for this time of year. An energy department report due tomorrow will probably show inventories rose 1.5 million barrels last week, based on the median estimate of eight analysts surveyed by Bloomberg News. Forecasts ranged from a 2.56 million barrel gain to a decrease of 2.5 million barrels.

Brent crude oil for November settlement gained 36 cents, or 0.6 percent, to $65.90 a barrel on the London-based ICE Futures Europe exchange at 10:13 a.m. Sydney time. Yesterday, the contract gained 43 cents, or 0.7 percent, to $65.54.

FKLI Commentary on 29/09/09

FKLI Sep Futures contract plunge 16.5 lower to close at 1205 levels as compare to previous trading session to with a total of 8,472 lots traded in the market. FKLI was plunge down lower as regional indices, especially Hang Seng indices and Nikkei indices were traded weak due to some unfavorable news released.

Technically, FKLI seems temporary supported at 78.6% Fibonacci projection levels at 1205 regions upon closing. Based on our technical view, our opinion suggests FKLI are likely to reverse trend provided resistance levels at 1215 and 1222 were not violated in the coming trading sessions. Traders were advice to hold short position on rebound as we think FKLI are likely to rebound higher provided support levels at 1202 and 1189 were not violated during trading sessions.

FCPO Commentary on 29/09/09

CPO 3rd month Dec futures contract plunge RM83 lower as compare to previous trading sessions to close at RM2103 with a total of 13,079 lots traded in the market. CPO price were traded weak during trading session as crude oil and soybean oil electronic trading were traded lower during trading sessions.
Technically, CPO price were traded within a downtrend channel since open for trading.

CPO price manage to break up from up from the downwards channel. Based on our technical view, we notice CPO price still seems supporting above 78.6% Fibonacci retrace levels at RM2083 region in the daily chart. Our opinion suggests CPO price would trade lower in the coming trading session provided support levels at RM2095 and RM2070 were not violated during trading sessions. Traders were advice to hold long position in the coming trading session while be alert around resistance levels at RM2140 and RM2188 regions.

Palm Oil Must Drop to 1,900 Ringgit to Lure Buyers, Mistry Says

Sept. 27 (Bloomberg) -- Palm oil, the world’s most consumed vegetable oil, must drop 13 percent from current levels to stoke demand amid mounting stockpiles in Malaysia, according to Dorab Mistry, director of Godrej International Ltd.

Palm oil, used in food and biofuels, needs to drop to 1,900 ringgit a ton ($547) for demand to rebound, Mistry said today at a conference in Mumbai. Futures for December delivery gained 3.4 percent to 2,186 ringgit on Sept. 25 in Malaysia.

Prices of the tropical commodity, which competes directly with soybean oil for use in cooking and to make biodiesel, have climbed 29 percent this year on concern about a global oilseed shortage. The rally has been aided by higher crude prices and speculation the global economy is recovering.

“I believe crude palm oil prices need to fall from current levels in order to stimulate demand,” said Mistry, who’s been trading edible oils for more than three decades. “Prices need to become more competitive if biodiesel usage is to expand. This is not the case at present but it needs to happen.”

Reserves in Malaysia reached a six-month high last month after production climbed to the second-highest level on record and exports dropped the first time in four months. Stockpiles rose 6.2 percent to 1.42 million tons in August from July, the nation’s palm oil board said Sept. 10.

“If a major stock build-up can be avoided, by letting the market find a clearing level, it would clear the way for a good bounce in prices” in the first quarter of 2010, Mistry said.

Palm oil may reach 2,400 ringgit in the first quarter of next year because of a seasonal decline in production and tight soybean oil supplies, he said. Output typically reaches a peak in the third quarter, and 55 percent of annual production is harvested in the second half of the year.

El Nino

“As we enter 2010, I believe production will decline due to seasonal factor and also due to the effects of the current El Nino,” Mistry said.

Production in Malaysia may be 17.5 million tons this year and expand by 500,000 tons next year, while output in Indonesia may be 21.5 million tons this year and grow by 2 million tons in 2010, Mistry said. The two countries are the biggest producers.

While Malaysia’s production is on track this year to exceed last year’s record 17.7 million tons, output next year may drop by 5-16 percent if the El Nino weather event occurs, Plantation Industries and Commodities Minister Bernard Dompok said in July. The country in April forecast 2009 output of 18.3 million tons.

“The general expectation is that it will be a mild El Nino and that production will grow strongly once the effect of El Nino peters out in the second half of 2010,” Mistry said.

Predictions

Mistry said his price outlook for palm oil is based on the assumption that crude oil will trade at between $65 and $80 a barrel until the spring of 2010.

Mistry on Aug. 4 correctly predicted palm oil will drop to 2,100 ringgit a ton as inventories build on increased production. Mistry had forecast twice in May that prices may climb to 3,000 ringgit, driven by a “powerful bull market,” including rising demand from India.

Palm oil peaked at 2,799 ringgit on May 13.

Godrej is one of the largest importers of edible oils into India, the biggest consumer of palm oil after China.

Oil May Fall Amid Rising Fuel Supplies, Survey Shows

Sept. 25 (Bloomberg) -- Crude oil futures may decline in anticipation of extended increases in U.S. fuel supplies as demand drops.

Twenty-four of 44 analysts surveyed by Bloomberg News, or 55 percent, said futures will drop through Oct. 2. Seven respondents, or 16 percent, forecast that the market will rise and 13 said prices will be little changed. Last week, 38 percent of analysts said oil would fall.

“Prices, and especially refining margins, will continue to decline next week in light of swelling product inventories in the U.S. and Europe,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

U.S. gasoline stockpiles surged 5.41 million barrels last week, more than 10 times what was forecast by analysts in a Bloomberg News survey, according to an Energy Department report on Sept. 23. Supplies of distillate fuel, a category that includes heating oil and diesel, rose 2.96 million barrels, almost double what was estimated.

U.S. fuel consumption dropped 3.3 percent to 18.5 million barrels a day, the lowest since the week ended June 26. Gasoline use slipped 2.3 percent to 8.79 million barrels a day, the lowest since January.

Crude oil for November delivery fell $6.47, or 8.9 percent, to $66.02 a barrel this week on the New York Mercantile Exchange. Oil has climbed 48 percent this year and has slipped 55 percent from a record $147.27 reached on July 11, 2008.

The oil survey has correctly predicted the direction of futures 47 percent of the time since its start in April 2004.

Bloomberg’s survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

RISE NEUTRAL FALL
7 13 24

Oil Rises for Second Day on Recovery Outlook, Iran Tensions

Sept. 28 (Bloomberg) -- Crude oil rose for a second day on speculation the global economy’s gradual recovery will increase demand for fuel and energy.

A Conference Board report tomorrow in the U.S., the world’s largest oil user, may show consumer confidence is at its highest in a year, according to economists surveyed by Bloomberg News. Prices also rose after Iran, the world’s fourth-largest oil producer, conducted missile tests days before meeting with western officials over a previously secret nuclear facility.

“The overall trend is still up,” said Toby Hassall, research analyst with Commodity Warrants Australia Pty in Sydney. “We’re in the early stages of a recovery. We’ve got a fair bit of data this week which could make things a bit clearer.”

Crude for November delivery gained as much as 47 cents, or 0.7 percent, to $66.49 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $66.36 at 7:22 a.m. in Singapore.

The contract rose 13 cents to $66.02 on Sept. 25, trimming its loss for the week to 8.9 percent. Prices climbed from $65.05, an eight-week low, after U.S. President Barack Obama said a new nuclear plant Iran is building shows the Islamist nation is flouting international law.

Oil fell last week as mixed economic data pulled U.S. equity prices lower and the nation’s oil and fuel stockpiles rose. U.S. demand, based on deliveries of all fuel types from refineries and terminals, is at its lowest since the end of June after three straight weeks of declines, the Energy Department said Sept. 23.

‘Reality Check’

“Those inventory numbers were a bit of a reality check, given that the crude market has been relying on support from equities and a weaker dollar,” Hassall said. Weak equity prices this week could be enough to push oil toward $60, he said.

Brent crude for November settlement rose 34 cents, or 0.5 percent, to $65.45 a barrel on the London-based ICE Futures Europe exchange. It climbed 0.5 percent to $65.11 on Sept. 25.

Officials from the U.S., France, U.K., Russia, China and Germany will meet Iranian counterparts in Geneva on Oct. 1. Extra sanctions are being prepared after Iran secretly began building a pilot fuel-enrichment plant, officials said last.

The international community has a “rich list” of economic, banking, and technology sanctions it can apply to get Iran to end its nuclear research, U.S. Defense Secretary Robert Gates said yesterday.

“There is no military option that does anything but buy time,” Gates said in an interview on CNN.

The more conciliatory approach of the Obama administration makes any confrontation with Iran unlikely, Hassall said. Surplus global capacity has also reduced the threat of the dispute affecting oil supplies, he said.

“Twelve to eighteen months ago it would have been a different story,” he said. “We’re just not that sensitive at this point in the economic cycle.”

Gold Falls, Capping First Weekly Drop Since July; Silver Sinks

Sept. 25 (Bloomberg) -- Gold fell, capping the biggest weekly decline since mid-July, as the metal’s failure to reach a record discouraged investors who had bet on a longer rally. Silver tumbled.

Gold traded below $1,000 for the second straight day after climbing to $1,025.80 on Sept. 17, near the all-time high of $1,033.90 set in March 2008. Silver sank the most in a week since February. Before today, silver surged 44 percent and gold rose 13 percent this year, heading for a ninth-straight annual gain.

“If I’m long gold, I’ve got to be pretty discouraged that gold couldn’t get anything going above $1,000,” said Matt Zeman, a LaSalle Futures Group metals trader in Chicago. “All these people who’ve piled into gold in the past few weeks are going to be running for the exits.”

Gold futures for December fell $7.30, or 0.7 percent, to $991.60 an ounce on the Comex division of the New York Mercantile Exchange. The metal lost 1.9 percent this week, the steepest decline for a most-active contract since July 10.

Before this week, speculators and index funds had never been so bullish. Since the start of the year, so-called net-long positions, or bets on rising gold futures, had almost doubled to a record 235,647 in the week ended Sept. 15, the U.S. Commodity Futures Trading Commission said on Sept. 18.

Gold has declined since Sept. 23, when policy makers at the Federal Reserve signaled they can control accelerating prices. The Fed kept its target lending rate at a record-low range of zero to 0.25 percent, where it has been since December.

“The bulls in the gold market have been trading on the belief that there will be inflation,” said Tom Hartmann, an AltaVest Worldwide Trading Inc. analyst in Mission Viejo, California. “The Fed took some air out of the market.”

Bullish Outlook

Fourteen of 21 traders, investors and analysts surveyed by Bloomberg, or 67 percent, said gold will rise next week. Five forecast lower prices, and two were neutral.

“There is still room for net-long positions to be built before the inevitable liquidation of positions takes the metal lower,” Deutsche Bank AG said in a report. “We continue to believe that gold fundamentals are attractive, given long-term inflation threats.”

In another New York market, silver futures for December delivery dropped 23.5 cents, or 1.4 percent, to $16.06 an ounce. The metal is down 5.9 percent this week, the biggest decline for a most-active contract since Feb. 27.

Yen Rises to 8-Month High on Repatriation, Intervention Concern

Sept. 28 (Bloomberg) -- The yen rose to the highest level in eight months versus the dollar on prospects Japanese exporters are repatriating profits before the fiscal first half ends this week.

Japan’s currency also advanced against all of its 16 major counterparts on speculation the nation’s government won’t intervene to stem the currency’s gain. The Australian dollar fell to its weakest level in eight months versus the New Zealand currency on speculation the smaller South Pacific nation’s central bank will raise rates from a record low.

“Japanese firms are continuing to bring home profits,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The government’s stance on a strong yen is careless, as it doesn’t benefit the nation’s export- driven economic structure.”

The yen climbed to 88.99 per dollar as of 9:24 a.m. in Tokyo from 89.64 in New York on Sept. 25. It earlier touched 88.24, the strongest level since Jan. 23. The currency rose to 130.66 per euro from 131.70, after earlier rising to 129.83, the highest since July 14. The dollar traded at $1.4690 per euro from $1.4689.

The Australian dollar bought NZ$1.1991, the least since Jan. 13, before trading at NZ$1.2025 from NZ$1.2069 in New York on Sept. 25.

Japan’s currency gained on expectations the nation’s exporters are taking advantage of an April 1 rule change that waives taxes on repatriated profits. Under previous laws, companies had to pay a combined 40 percent tax on overseas earnings. The first half of Japan’s fiscal year ends Sept. 30.

Yen Forecasts

Large manufacturers in Japan forecast the yen would average 94.85 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released July 1.

Japanese Finance Minister Hirohisa Fujii said last week he didn’t support a weak yen, fueling speculation Japan won’t resort to intervention to curb yen’s appreciation. Central banks intervene in foreign-exchange markets by selling and buying currencies.

In a survey released by Japan’s Cabinet Office on April 22, exporters said they can remain profitable as long as the yen trades at 97.33 per dollar or weaker. A rising currency hurts exporters by making their goods more expensive to foreign buyers and reducing the value of profits earned abroad. Exports account for 12 percent of Japan’s economy, compared with 6 percent in the U.S.

FKLI Commentary on 280909

FKLI Sep Futures contract traded 2.5 higher to close at 1221.5 levels as compare to previous trading session to with a total of 8,091 lots traded in the market. FKLI was rebound higher during trading hour as regional indices were manage to close higher despite were traded lower during opening of trading sessions.

Technically, FKLI is highly possible for undergoing trend reversal as manage to penetrate hourly support levels at 1216 regions during trading session while closing at 50% rebound levels at 1222 regions. Based on our technical view, our opinion suggests FKLI would trade lower in the coming trading session provided resistance levels at 1227.5 and 1233 were not violated during trading hour. Traders were advice to hold short position in the coming trading session while be cautious around support levels at 1218 and 1210 regions.

FCPO Commentary on 280909

CPO 3rd month Dec futures contract traded RM71 higher as compare to previous trading sessions to close at RM2186 with a total of 7,083 lots traded in the market. CPO price traded higher during trading session despite not much encouragement from crude oil and soybean oil electronic trading while export figure were seems neutral instead of bullish report.

Technically, CPO price were surge upwards after manage to retrace lower towards 61.8% Fibonacci retrace levels at RM2106 regions before to surge up to complete wave 3 wave RM2182 at 150% Fibonacci projection levels. Based on our technical view, our opinion suggests CPO price would likely to retrace lower in the coming trading towards support levels at RM2146 and RM2123; both were 50% and 78.6% Fibonacci retracement levels. Traders were advice to hold long position in the coming trading session provided support levels were not violated at any moment. Resistance levels were seen at RM2205 and RM2230 regions.