Written by Sumit Roy  |

August 17, 2012

Morning Call: WTI-Brent Spread Narrows, Platinum Jumps On Strike, Copper Rises On Low Inventories

Details

Commodities trade mixed.

Commodities are narrowly mixed on the last trading session of the week. As has been the case for most of the period, news flow is relatively light, with no major macroeconomic data scheduled for release.

In Europe, Spanish 10-year bond yields—currently seen as the best gauge of eurozone sovereign debt fears—were last trading down by 7 basis points to 6.46 percent.

The U.S. Dollar Index rose by 0.17 percent, to 82.49.

• Gold was last trading up by $1.25, or 0.08 percent, to $1616.38, while silver edged down by $0.02, or 0.07 percent, to $28.20.
  
  Platinum gained $14.40, or 1 percent, to $1455.90 and palladium rose by $4.04, or 0.94 percent, to $589.50.
  
  The third-largest South African platinum miner, Lonmin, has shut down all of its mining operators due to a labor dispute.
  
  "While lost platinum production so far does little to put a dent to our estimated surplus of 210,000 ounces, the risk is that the situation starts to infect other major operations in South Africa," UBS said. "If the unrest becomes materially worse from here, there is also the potential of positive government intervention, easing fears which would in turn dampen platinum's ... strength."
  
  But there are doubts as to whether the government will be able to respond quickly enough, particularly given the politics surrounding the ANC leadership elections in December, UBS said.
  Gold climbs, erases weekly loss on hopes of ECB action
  
  
• Crude oil is mixed today, as Brent falls by $1.27, or 1.1 percent, to $114, while WTI trades unchanged at $95.60. In turn, the spread between the two benchmarks narrowed to $18.40 from recent highs above $22.
  
  "Oil is simply overbought, and so some profit-taking will kick in," said Andrey Kryuchenkov, an analyst at VTB Capital. But ultimately geopolitical tensions and the macroeconomic backdrop will set the tone in coming weeks."
  Oil Trims Third Weekly Gain on Speculation Rally Was Excessive
  
  
• Natural gas was last trading down by $0.03, or 0.95 percent, to $2.70/mmbtu.
  
  "Power demand should begin to seasonally decline in the next week or two," said Subash Chandra, analyst at Jefferies in a recent interview with HAI.
  
  "Without rising power demand, it's very hard to sustain a rally. The seasonal power demand peak is around now—within the next week or so. Unless we get record-breaking temperatures in the third quarter—which the forecasts don't call for—or you get a massive hurricane outage, you'll have continued stress on the commodity."
  Jefferies: NatGas Price Forecasts Still Too High, Avoid Gas-Heavy Stocks & Buy Anadarko
  
  
• Grains are mixed, as corn sheds $0.02, or 0.28 percent, to $7.96/bushel, while soybeans adds $0.05, or 0.32 percent, to $16.62 and wheat gains $0.08, or 0.96 percent, to $8.70.
  
  "There are forecasts of rains in the U.S. Midwest which should provide much-needed moisture for the soybean crop," said Ker Chung Yang, commodities analyst at Phillip Futures. "For the wheat market, there is some support from expectations of export curbs in Russia."
  Wheat up on Russian supply woes, but faces 4th week of declines
  
  
• Copper was last trading up by $0.04, or 1.11 percent, to $3.42/lb on Comex.
  
  "Copper inventory levels on the LME are extremely low, and the market is vulnerable to a squeeze," said Guy Wolf, macro strategist at Marex Spectron. "We've seen a further small draw in LME stocks yesterday, which combined with U.S. housing starts is bullish for copper. Despite concern over Chinese demand, the short-term outlook for copper looks good."
  Copper gains on softer dollar, Merkel comments
  
  
  

What to Watch For:

1:00 p.m. ET: Baker Hughes Rig Count