Crude Rises on U.S. Supply Outlook, Russia Sanctions

By Mark Shenk  Apr 30, 2014 2:17 AM GMT+0530  

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Brent oil rose as sanctions against Russia over the Ukraine crisis were strengthened and gunmen opened fire in Libya’s parliament. West Texas Intermediate advanced before a U.S. government inventory report.

The European benchmark grade climbed 0.8 percent to expand its premium to WTI. The U.S. and European Union widened sanctions against Russia yesterday. Libya suspended a vote on the country’s premiership after the shooting at the parliament in Tripoli. The Energy Information Administration will report tomorrow that U.S. crude supplies rose 2.2 million barrels to 399.9 million, the most since 1931, a Bloomberg survey showed.

“We’re trying to make sense of the latest headlines from Ukraine and Libya,” said Michael Wittner, the head of oil market research at Societe Generale (GLE) in New York. “The risks in both countries should keep a floor under the market, even when there are no new headlines.”

Brent for June settlement climbed 86 cents to close at $108.98 a barrel on the London-based ICE Futures Europe exchange. Trading was 12 percent above the 100-day average at 4:36 p.m. in New York.

WTI for June delivery advanced 44 cents, or 0.4 percent, to settle at $101.28 a barrel on the New York Mercantile Exchange. Futures climbed to $102.20 in intraday trading. Volume was 4.5 percent below the average. The U.S. oil closed at a $7.70 discount to Brent, compared with $7.28 yesterday.

API Report

Prices retreated from the settlement after the American Petroleum Institute reported U.S. crude inventories rose 3 million barrels last week. WTI futures fell 2 cents to $100.82 at 4:36 p.m. in electronic trading. Prices were $101.07 before the report was released at 4:30 p.m.

The U.S. yesterday added Igor Sechin, chief executive officer of Rosneft, to its sanctions list along with six other individuals and 17 companies linked to Putin’s inner circle such as InvestCapitalBank and Volga Group. The European Union put 15 individuals on its list, including Russian Deputy Premier Dmitry Kozak.

The EU and the U.S. say Russia hasn’t lived up to an accord signed April 17 in Geneva intended to defuse the confrontation between the Ukrainian government and pro-Russian separatists supported by the authorities in Moscow. They’ve both warned that they’ll levy penalties on Russian industries if Putin escalates by sending troops into Ukraine.

Russian Economy

“Russia needs to pump increasing amounts of oil to support its economy and needs our technology to do it,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $115 billion of assets. “If the Ukraine crisis continues to drag on, their production may get less robust. This may add to upward pressure on prices later this year.”

About 25 armed protesters attempted to storm the Libyan parliament building, fired at windows after they were blocked by guards, lawmaker Mohammed Ali Abdullah said.

Libya’s Zueitina port will load 600,000 barrels of oil May 1-3 for shipment to Europe, Mohamed Elharari, spokesman of state-run National Oil Corp., said by phone from Tripoli. It would be the first cargo to leave the port since July. Hariga harbor is loading its second cargo since reopening on April 16, state news agency Lana said, citing Yasin Hammad, the port’s director.

Rising Stockpiles

U.S. crude supplies climbed to 397.7 million barrels in the week ended April 18, the EIA said April 23. It was the highest stockpile level in weekly data that began in 1982 and the most since 1931 in monthly government figures going back to 1920.

Supplies on the Gulf Coast, known as PADD 3, increased to 209.6 million in the week ended April 18, the most since EIA began recording that data in 1990.

“It’s hard to maintain rallies in WTI because of the glut in supply along the Gulf and the near-record levels seen nationwide,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The Brent-WTI spread won’t narrow much as long as this is the case.”

Crude inventories at Cushing, Oklahoma declined 788,000 barrels in the same period to 26 million, the lowest level since October 2009. Supplies at the storage hub have tumbled since the southern portion of the Keystone XL pipeline began moving crude in January to the Texas Gulf Coast from Cushing.

The EIA will probably report that U.S. gasoline stockpiles dropped 900,000 barrels last week to 209.1 million, according to the median of eight analyst responses in the Bloomberg survey.

Implied volatility for at-the-money WTI options expiring in June was 17.6 percent, down from 17.9 percent yesterday, data compiled by Bloomberg showed.

Electronic trading volume on the Nymex was 415,217 contracts at 4:37 p.m. It totaled 447,235 contracts yesterday, 17 percent below the three-month average. Open interest was 1.64 million contracts.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net Richard Stubbe, Charlotte Porter

Commodities take a breather as Crimea tensions ease, Buy signal in Gold, Sell Oil

Commodity complex took a breather on Monday and early Tuesday trading as Crimean vote to rejoin Russian federation went off peacefully and caused safe haven demand for gold to wane while Oil that was buoyant on geo-political worries also eased falling into sell territory on an intra day basis.

Commodity prices especially gold prices dipped in Asia on Tuesday as the impact of Western sanctions on Russia over the annexation of the Crimean region of the Ukraine were seen as mild and a sign that tensions remain in check

US Gold futures for April delivery has fallen from a high of $1391 to $1361.1 in electronic trading on Tuesday while US WTI crude oil has fallen to $97.95 per barrel.

"On Gold charts, an RSI of 61.70 is quite bullish for godl and MACD is slightly in positive territory. But price are still comfortably above the 200 day moving average of $1324.56 indicating markets have only taken a breather and watching further developments to unfold. Gold could rebound again after hitting $1350 levels," accorinding to Sreekumar Raghavan, Chief Strategist at Commodity Online Group.

WTI crude oil on the ohter hand is trading below 200 day EMA of $98.48 a barrel and RSI at 40.27 indicates the market is still bearish.

Meanwhile, Crimea did not have a bearish impact on Natural gas futures as it shot up on Monday after updated weather forecasting models called for a cold snap to sweep across the U.S. in the coming days and hike demand for heating in its wake.Natural gas prices shoot up on chilly spring forecast
On the New York Mercantile Exchange, natural gas futures for delivery in April traded at $4.554 per million British thermal units during U.S. trading, up 2.90%. The commodity hit session high of $4.585 and a low of $4.484.

Mixed trends were seen in dollar index on global developments. US Copper futures for May delivery is trading slightly positive at $2.98 after closing at $2.95 a pound on Monday although the underlying sentiments are bearish on China data.

Falling Gold/Copper ratio raises concerns about global economic growth

The falling Gold/Copper ratio indicates that global economy may not be growing as expected, according to a weekly report from ETF Securities Ltd.

Weaker than expected US and China ecnomic data and the growing Russia-Ukraine crisis apear to have changed investor riks perceptions, ETFS said.

More recently a China corporate bond default has raised concerns about a possible unwinding of copper collateralised financing deals. The combination of these factors has driven the copper/gold ratio sharply lower. Copper/gold ratio is sometimes viewed as a leading global economic indicator.

The question now is whether continued strong
consensus global growth forecasts are now going to need to be scaled back, ETFS said.

The present scenario seems to be vastly different from the beginning of 2014 when higher stock prices, strong economic growth, higher bond yields, a stronger dolar and lower gold rices were some of the key consensus expectations.

Nat Gas sees end of peak winter buying in US, fundamentals bearish in Europe: PIRA Energy

Ukrainian crisis or not, gas fundamentals are becoming more bearish by the day. The one-day rally on Ukraine may well be repeated in the weeks to come with additional one-day rallies, according to PIRA Energy

NYC-based PIRA Energy Group believes that peak winter buying has been wrapped up. In the U.S., Appalachian shale bottlenecks are increasingly visible. In Europe, gas fundamentals becoming more bearish. Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:

Peak winter buying has been wrapped up
In Europe and Asia, peak winter buying has been wrapped up, with the recent Ukraine crisis having little impact. South American and Mideast counter-seasonal buyers are entering the scene, but it appears that in Brazil at least buying will not be as strong as last year.

Appalachian Shale bottlenecks increasingly visible
With rapidly increasing gas processing capacity set to unleash more production from the Utica Shale, existing pipeline takeaway options may prove insufficient given the growing needs of Marcellus producers. Diminishing remaining options to nearby markets have kept producers busy making financial commitments to underwrite projects that would gain access to other markets. The next major round of development is primarily aiming to reach markets in the Midwest and South — almost entirely via backhauls and/or flow reversals — as well as greater access to eastern Canada. Yet, this very large-scale future expansion of take-away capacity will not be ready until late 2015 / early 2016.

Gas fundamentals becoming more bearish
Ukrainian crisis or not, gas fundamentals are becoming more bearish by the day. The one-day rally on Ukraine may well be repeated in the weeks to come with additional one-day rallies, but it is clear to PIRA that no one wants Europe to be deprived of Russian gas flows on either side of this dispute. And when neither side benefits from a cut-off, it is exceedingly unlikely that one will occur. The goal here is not to ignore the significance of the Russia-Ukraine relationship on European gas markets, but to understand it in the commercial realities of the broader current supply/demand balances. The Ukrainian corridor for Russian gas exports is not as important as it used to be, but still plays a central role in European gas supply. PIRA's analysis of pipeline flows shows that Russia can divert a little over half of the gas it moves through Ukraine to locations all over Europe. A special feature published earlier this week on the ENG portion of the website details the pipeline flows at risk.

NYC-based PIRA Energy Group reports that large oversupply in electricity markets will further squeeze dark spreads. In the U.S., while the gas storage deficit continues to expand, and regional gas prices oscillate, the 12-month strip stands at $4.67/MMBtu. Specifically, PIRA’s analysis of electricity and coal market fundamentals has revealed the following:

Large oversupply in electricity markets will further squeeze dark spreads
2013 financial results being announced so far are illustrating the deep crisis of conventional generation across Europe. While lignite and coal are joining gas in no longer being immune from surges in renewable output, generators are also admitting that lower fossil fuel utilization is an irreversible trend. Considering that a solution to the large oversupply in the major European power market is not in sight, why are the German clean dark spreads not narrowing even further down to pre-Fukushima levels?

A stout storage withdrawal
An astoundingly stout withdrawal of 152 BCF was reported in today’s EIA update, a figure coming in at the highest end of a market range expecting a draw in the mid-to-high 130s. Besting both the year-ago (149 BCF) and the five-year average pull (105 BCF), the report stoked some bullish enthusiasm in the nearby NYMEX contract, which has otherwise been anemic at best of late. The April contract jumped by more than a dime on the news and managed to finish the session with a gain of ~12¢.

Headwinds abound for Global Thermal Coal pricing
Coal pricing was mixed last week, with prices for FOB Newcastle (Australia) and API#4 (South Africa) falling, while API#2 (Northwest Europe) rebounded somewhat. The strength in API#2 was likely largely due to the escalation of tensions in Ukraine and worries that Russian gas volumes to Europe would be curtailed. With South African coal supply returning to normal and Colombian exports headed that way in the next month; it will be hard for coal prices to appreciate rapidly.

Can commodity prices influence elections?

India is in the mood of parliamentary elections, and in less than 90 days, a new government will be in place in New Delhi. The Indian industry hopes that a new, stable government could perhaps help the country emerge from the current economic recession. People, as usual, are confused by electoral surveys and political predictions. But everyone agrees in unison that the new government needs to propel the country to a phase of economic resurgence.

One interesting national survey went largely unnoticed recently. The study conducted by the Centre for the Study of Developing Societies (CSDS) on behalf of Bharat Krishak Samaj says that farmers and rural Indians—the bulk of India’s vote bank—are really upset over the rising prices of essential commodities they consume and the low prices of the agricultural commodities they produce.

So, the moot question is, can commodity prices influence general elections in India? It looks that even though politics in India is divided over caste, creed, religion and communal passions and social divisions, a large number of voters will cast their vote on the impact the commodity prices had on their lives in the last five years.

The study--Report on the State of Indian Farmer--interviewed about 11,000 farmers in 274 villages of 137 districts across 18 states.

Here are some salient points from the survey:

**A significant number of farmers in India are ready to quit farming thanks to low returns from their produce. Given a chance, many of them are willing to migrate to urban areas for better living conditions. 47 per cent of those surveyed farmers said their condition is so bad that they prefer some work other than farming.

**About 70 per cent of the farmers surveyed said their crops got destroyed at least once in the past three years. About 58 per cent of them blamed both governments at the Centre and State for their problems.

** The survey, which also interviewed 4,298 women, found that 67 per cent of them felt that income from agriculture was not sufficient to fulfill the livelihood needs of their families. Of the 2,116 youth interviewed, only 20 per cent said they would continue farming.

**A large section of farmers – about 62 per cent – were not aware of the concept of minimum support price (MSP) for various crops that the governments keep declaring. This means the farmers are not really benefitting from government financial schemes to protect their agricultural produce from low prices.

**Most farmers said only rich farmers got the benefits of government schemes and policies, and only a tenth of poor and small farmers were found to have benefited from these schemes. Eighty-three per cent of the farmers had not heard about Foreign Direct Investment. Of them, 51 per cent said FDI should not be allowed since farmers may not be able to bargain.

**Most of those surveyed said price rise is going to be the most important poll issue in the 2014 Lok Sabha elections. They also said that unemployment and issues related to irrigation would also dominate the elections.

**Over half of those surveyed – 57 per cent – felt that no political party cared about farmers’ interests. About 16 per cent felt that the Bharatiya Janata Party (BJP) cared about farmers’ interest, while 13 per cent opted for Congress.

The survey on the eve of the parliamentary elections bares some truths. Majority of farmers have talked truth, because in the last few years farming has been an uneconomical activity thanks to volatile commodity prices and rising cost of production.

Prices of essential commodities like rice, dal, onion and vegetables have increased. But prices of several commodities that farmers produce have been caught in the vortex of volatility, low returns, bad weather and extreme environmental conditions.

70 per cent of Indians live in rural areas, but has any government at the State or the Centre cared to provide enough opportunities of financial inclusion, investment, technological know-how and irrigation facilities to the farming community in India?

If not, the state of commodity prices that has been affecting farmers and common man hard will considerably influence the electoral fortunes of several politicians and electoral candidates in the coming polls.

Russia Urged to Ease Crimea Crisis Under Sanctions Threat

The U.S. and European Union put Russian President Vladimir Putin on notice that they will be united on imposing sanctions if he’s unwilling to defuse the Ukraine crisis and pursue a negotiated solution.

As Crimean separatists backed by Russian forces pushed to split from Ukraine, the U.S. banned visas for Russian officials and others it said were complicit in violating the sovereignty of the ex-Soviet state of 45 million. U.S. President Barack Obama signed an order authorizing financial sanctions, while EU leaders halted trade and visa talks with Russia and threatened punitive economic measures in what’s become the worst rift between Russia and the West since the Cold War era.

Despite signs of divisions among EU leaders, Obama said today he’s confident that “we are moving forward together” to press Russia toward the “path of de-escalation.”

The U.S. and its allies will keep increasing pressure “to impose a cost on Russia and those responsible for the situation in Crimea,” he said at the White House. Implementation will be flexible “based on Russia’s actions,” he said.

Obama told Putin in an hour-long phone call today that Russia’s actions have violated Ukraine’s territorial integrity and brought on the penalties unveiled by the U.S. and EU, according to a White House statement. The standoff can be resolved diplomatically, through talks between Russia and Ukraine’s government, Obama told Putin, the White House said.

Putin and Obama hold differing views on the crisis, though U.S.-Russia relations shouldn’t be sacrificed, the Kremlin said in an e-mailed statement on the leaders’ conversation.

‘Political Will’

“This is a matter of political will, but there’s also a matter of diplomatic strategy,” said Juan Zarate, senior adviser at the Center for Strategic and International Studies, a Washington policy group, and author of “Treasury’s War: The Unleashing of a New Era of Financial Warfare.” The U.S. doesn’t want to be “too out in front in a way that not only presents a division in the West, but also that ultimately hurts European interests.”

Tensions in Ukraine have “increased risks” to Russia’s economy, already suffering from currency depreciation and capital flight, Fitch Ratings Ltd. said. The crisis threatens to derail $8 billion of international loans sought by at least 10 Russian companies, according to data compiled by Bloomberg.

At a summit in Brussels, eastern EU states urging a tough line on the Kremlin clashed with some western counterparts that wanted to offer Putin more time to pull back. The mood shifted after a speech by Ukrainian Prime Minister Arseniy Yatsenyuk, Polish Prime Minister Donald Tusk told reporters in Brussels.

Freezing Assets

The EU leaders agreed to make preparations for sanctions, as well as accelerate the timetable to draw Ukraine closer to the 28-nation bloc, EU President Herman Van Rompuy said. If Russia doesn’t doesn’t back down, European nations “will decide on additional measures, such as travel bans, asset freezes and the cancellation of the EU-Russia summit,” he told reporters.

Obama, in the executive order, authorized Treasury Secretary Jacob J. Lew to take steps that could include freezing assets or blocking American companies or individuals from doing business with Russians, Ukrainians or others deemed a threat to Ukraine’s security.

The Treasury Department is redoubling efforts to prevent illegally acquired Ukrainian assets from leaving the country, concerned that such transfers might destabilize the global financial system, said a department official who spoke by phone today under the condition of not being further identified.

Holding Fire

The U.S. wants to prevent misappropriated state assets, or proceeds of bribery or corruption, from entering the financial system. The Treasury’s Financial Crimes Enforcement Network released a list of 18 people, including former President Viktor Yanukovych, subject to a Feb. 26 advisory for banks to monitor suspicious asset transfers. It hasn’t yet compiled a list of people and entities that might be targeted by the sanctions announced today, the official said.

The U.S. has held back on implementing such sanctions to give Putin time to consider a western proposal, Secretary of State John Kerry said. His remarks reflect uncertainty about how Putin will respond to such threats.

“Even as we will keep faith with what we have said we would do, we want to be able to have the dialogue that leads to the de-escalation,” Kerry said in Rome, where he met with Russian Foreign Minister Sergei Lavrov at an international meeting on Libya.

Economic Leverage

Anders Aslund, a senior fellow at the Peterson Institute for International Economics in Washington, said the Europeans have greater economic leverage than the U.S. does -- and greater financial stakes given their own trade ties to Russia.

“Economic pressure essentially depends on Europeans taking strong actions, because Europe receives nearly half of Russia’s exports, while the United States only takes 3 percent of Russia’s exports,” he said in an e-mail.

The crisis already is having an economic impact. The ruble slid 0.9 percent against the central bank’s dollar-euro basket by 9:52 p.m. in Moscow. Russia’s Micex Index dropped 1 percent, extending this week’s decline to 7.4 percent. About $55 billion was erased from the value of the nation’s equities March 3 after Russian lawmakers approved troop deployments to Ukraine.

“So far, we’ve seen a major impact on the Russian economy and on the Ukrainian economy,” and some financial impact on bordering countries, European Central Bank President Mario Draghi told reporters in Frankfurt today. “It’s very, very difficult to foresee what is going to be the impact over a horizon of two, three years” if the crisis were to continue.

Energy Market

“For example, the impact on the energy market, what could this be on Europe?” Draghi said. “If we look at the next six months, the answer is going to be very mild. If we look at a year-and-a-half, it could be very serious.”

Europe depends on Russia for almost a third of its natural gas needs, including gas sent via pipelines through Ukraine.

With Ukraine’s problems magnified by the threat of default, the U.S. and Europeans also are taking steps to aid the new government.

The U.S. House of Representatives voted 385-23 for a bill to allow $1 billion in loan guarantees for Ukraine sought by the Obama administration. Further aid is being developed by Representative Ed Royce, a California Republican who leads the House Foreign Affairs Committee, and his Senate counterparts, Senate Foreign Relations Committee Chairman Robert Menendez, a New Jersey Democrat, and Bob Corker, a Tennessee Republican.

Aid Package

Arizona Republican John McCain, one of four senators working on measures to help Ukraine, said in an interview the package will include a loan-guarantee authorization, direct aid and language authorizing sanctions against Russia, including banking and travel restrictions.

The European Commission, the EU’s executive arm, yesterday outlined a wide-ranging Ukraine aid package worth 11 billion euros (about $15 billion) in loans and grants over the next couple of years, tied to the Kiev government striking a deal with the International Monetary Fund.

Western powers moved to deploy their economic weapons against Russia, as Ukraine’s new leader said on a visit to the North Atlantic Treaty Organization’s headquarters that “no military option is on the table.”

NATO Secretary General Anders Fogh Rasmussen called the Crimea crisis “the gravest threat to European security since the end of the Cold War,” while offering political support to Ukraine, which is not a member of the Western military alliance. Asked if Ukraine wants to join NATO, a move that would further rile Russia, Yatsenyuk said, “It’s not on our radars.”

Unmarked Uniforms

Controlled by pro-Kremlin local leaders, Crimea, part of Russia until 1954 and home to its Black Sea Fleet, has been rocked by threats from Moscow to “protect rights and freedoms” of the region’s Russian-speaking community since Moscow-backed Yanukovych was ousted from Ukraine’s presidency last month. Russian-speaking troops wearing unmarked uniforms have surrounded Ukrainian bases in Crimea, demanding that their forces surrender.

Kerry told reporters in Rome that he had discussed a path for lowering tensions, which Lavrov said he would convey to Putin. The top U.S. diplomat called for talks between Russia and the Ukrainian government with international participation, and sending monitors into Ukraine, including Crimea. Kerry said under that path, Russia could “maintain its basing rights in Crimea, provided that it abides by its agreements and respects Ukraine’s sovereignty and territorial integrity.”

Rejoining Russia

In contrast, lawmakers in Crimea voted in a non-binding measure to become part of Russia if voters agree in a referendum March 16. They also asked Putin and the parliament in Moscow to begin crafting procedures to make the province part of the Russian Federation, the state-run Crimean Information Agency reported.

Western leaders, including Obama and British Prime Minister David Cameron, said today that such a referendum would be unconstitutional and illegal.

Former Ukrainian Prime Minister Yulia Tymoshenko, who was jailed under Yanukovych, rejected a referendum as illegal and said Russian withdrawal is the “point of departure” for any negotiations.

High and persistent inflation makes Indians buy more Gold

 High and persistent inflation is one of the reasons for shifting preference towards investing in gold.

"Gold imports are highly correlated with households' inflation expectations. Indeed, in recent times high and persistent inflation has been one of the reasons for households preferring to put their saving in non-financial assets including gold, given relatively low real interest rates on deposits and financial instruments such as small savings and volatile capital markets."

There has been conflicting data releases on gold import quantities and value and so far nobody has a clue to the extent of the metal being smuggled into the country through airports, sea and land. Although official data shows India's gold appetite has fallen, actual imports could be higher than reported, Macquarie said.

"The data released by Ministry of Commerce, gold imports slowed to US$39bn in 2013 from US$53bn registered in 2012. Specifically, on a monthly basis, gold imports to India have shrunk to an average of US$1.3bn since June 2013, registering a decline of 74% over US$5.1bn (average) recorded in the previous 12 months. Government measures including increases in customs duty, measures to disincentivise gold imports and rupee depreciation all helped moderate Indians’ demand for gold. While there is no doubt that gold demand in India has slowed over the past few months, such a significant moderation seen over the past 6 months based on official data looks unlikely, in our view – we suspect actual imports would be somewhat higher than official data suggesst." 

According to the latest data released by WGC, Indians’ demand for gold (including jewellery and net retail investment) in volume terms stood at 975 tonnes in 2013, up 13% YoY. While gold demand in 1H of 2013 was up 59% YoY as Indians took advantage of
lower gold prices globally, the demand in the 2H of 2013 declined 24%YoY. Even in US$ terms, the slowdown in gold demand in India in 2013 was quite modest. As WGC mentioned in its report, the Indian gold market is fed by a number of alternative sources, including recycled gold, domestic production and unofficial imports. According to WGC,recycled gold helped to fill the gap left by the sharp drop in official imports.

Ukraine crisis: Most impact likely in Crude Oil, natural gas markets

Commodities play an important part in Ukrainian economy and hence the present crisis has created a new event risk for commodity markets, according to a special report by Deutsche Bank.

"The country’s commodity exports include agriculture, chemicals, metals and timber products. However, the country’s strategic position when it comes to natural gas flows is, in our view, the most relevant," Deutsche Bank said.

Europe is dependent on Russia for 30% of its gas supply, of which about 50% of these imports, or 15% of EU gas supply, arrive via Ukraine. The completion of the Nord Stream pipeline route under the Baltic Sea in 2012 reduced this
dependence from 80% (to 50%), but a complete halt would still be very disruptive. At the moment there are no signs of any reduction in flows.

Moreover, factors which will moderate the potential impact are the fact that gas storage levels across Europe are at unusually high levels owing to a mild European winter, and we are past the peak winter demand period.

Ukraine is also a major agricultural producer and consequently any disruptions to the country’s exports could have a meaningful impact on global balances. For example, it is not only forecast to be the world’s third largest exporter of corn in 2013-14 after the US and Brazil, but, Ukraine is also the world’s sixth largest exporter of wheat.

Ukraine crisis would have more impact on crude oil and natural gas as they constitute around 13% of commodity net imports as a share of GDP. The threat of an interruption of European gas suppllies imported from Russia via Ukraine has emerged for the first time since 2009, when gas shipments were halted as a result of disputes over import prices, transit fees and delayed payment.

This time around, the situation is different as a result of two factors: (i) the new pipeline route called Nord Stream, and (ii) the seasonally high level of gas inventories in Europe. While a complete halt of natural gas imports from Russia would still be an extremely disruptive event for the European gas network, the halt of Ukraine gas transit alone would have to last longer than in the past to be of equal importance.

Agriculture and metals
Ukraine's agriculture exports account for less than 5% of GDP while metal exports comprised less than 2% of net exports between 2010 and 2012. Hence impact on metals and agriculture sector would be weak,Deutsche Bank said.

Airborne Spy technology to revolutionise Oil exploration

The future of oil exploration lies in new technology--from massive data-processing supercomputers to 4D seismic to early-phase airborne spy technology that can pinpoint prospective reservoirs.

Oil and gas is getting bigger, deeper, faster and more efficient, with new technology chipping away at 'peak oil' concerns. Hydraulic fracturing has caught mainstream attention, other high-tech developments in exploration and discovery have kept this ball rolling.

Oil majors are second only to the US Defense Department in terms of the use of supercomputing systems, which find sweet spots for drilling based on analog geology. These supercomputing systems analyze vast amounts of seismic imaging data collected by geologists using sound waves.

What's changed most recently is the dimension: When the oil and gas industry first caught on to seismic data collection for exploration efforts, the capabilities were limited to 2-dimensional imaging. The next step was 3D, which gives a much more accurate picture of what's down there.

The latest is the 4th dimension: Time, which allows explorers not only to determine the geological characteristics of a potential play, but also tells them how a reservoir is changing in real time. But all this is very expensive. And oilmen are zealous cost-cutters.

The next step in technology takes us off the ground and airborne at a much cheaper cost according to Jen Alic, a global intelligence and energy expert for OP Tactical.

The newest advancement in oil exploration is an early-phase aerial technology that can see what no other technology—including the latest 3D seismic imagery—can see, allowing explorers to pinpoint untapped reservoirs and unlock new profits, cheaper and faster.

-We've watched supercomputing and seismic improve for years. Our research into new airborne reservoir-pinpointing technology tells us that this is the next step in improving the bottom line in terms of exploration, Alic said.

-In particular, we see how explorers could reduce expensive 3D seismic spending because they would have a much smaller area pinpointed for potential. Companies could save tens of millions of dollars.

The new technology, developed by Calgary's NXT Energy Solutions, has the ability to pinpoint prospective oil and gas reservoirs and to determine exactly what's still there from a plane moving at 500 kilometers an hour at an altitude of 3,000 meters.

The Stress Field Detection (SFD) technology uses gravity to gather its oil and gas intelligence—it can tell different frequencies in the gravitational field deep underground.

Just like a stream is deflected by a big rock, SFD detects gravity disturbances due to subsurface stress and density variations. Porous rock filled with fluids has a very different density than surrounding solid rocks. Remember, gravity measurement is based on the density of materials. SFD detects subtle changes in earth's gravitational field.

According to its developers, the SFD could save oil and gas companies up to 90% of their exploration cost by reducing the time spent searching for a reservoir and drilling into to it to determine whether there's actually any oil and gas still there.

-Because it's all done from the air, SFD doesn't need on-the-ground permitting, and it covers vast acreage very quickly. It tells explorers exactly where to do their very expensive 3D seismic, greatly reducing the time and cost of getting accurate drilling information," NXT Energy Solutions President and CEO George Liszicasz, told Oilprice.com in a recent interview.

Mexico's state-owned oil company Pemex has already put the new technology to the test both onshore and offshore in the Gulf of Mexico, and was a repeat customer in 2012. They co-authored with NXT a white paper on their initial blind-test used of the survey technology.

At first, management targeted the technology to frontier areas where little seismic or well data existed. As an example, Pacific Rubiales Energy is using SFD technology in Colombia, where the terrain, and environmental concerns, make it difficult to obtain permits and determine where best to drill.

India General elections results may influence Gold, equity markets

Gold prices in India may increase beyond Rs 32,000 per ten grams in the coming few months in case the voters throw up a highly fractured mandate leading to an unstable government at the centre, it cautioned.

 It is not only the sensex but also the gold prices which will largely be influenced by outcome of the general elections and stability of the new government along with global concerns over China and the US, an ASSOCHAM recent study on Gold has pointed out.

Gold prices in India may increase beyond Rs 32,000 per ten grams in the coming few months in case the voters throw up a highly fractured mandate leading to an unstable government at the centre, it cautioned.

On the other hand, in case India gets a decisive government after elections even within a coalition framework, the investor bias will return towards equity and real estate and the gold may lose in the bargain of portfolio shuffling, the study: Golden Connect of Indian Elections projected.

“At the moment, three important factors are driving the global gold market: Concerns over Chinese economy, uncertainty over the pace of the US economic recovery and the anxiety around the Indian general elections. India and China are competing with each other for retaining the slot of being the number one consumer of the yellow metal. The demand in these two markets is going to increase should the two economies witness political or economic uncertainties,” the paper said.

The trend of the investors shifting again to gold as a safe haven is already being witnessed. Gold has risen by over 10 percent so far this year largely because of these reasons and the investor interest in bullion-backed exchange traded funds has returned.

"In the case of a stable government, the sensex will zoom and the overall investor confidence about economic activities such as real estate, finance, consumer goods, two-wheelers and passenger cars will pick up immediately. This will see money moving away from gold which can then see further easing trend. However, reverse trend will be seen should there is a highly fractured mandate," the study noted. "

ASSOCHAM Secretary General Mr D S Rawat said, 'while the global factors will certainly weigh on gold prices, the Indian market as a consumer of the yellow metal and for the equities would be surely affected by the unfolding developments".

Mr. Rawat said the gold may still see increase in prices even if there is a stable government in India, should the situation in the Chinese economy worsens and the US economy does not pick up. In that case too, the global money will find haven in the yellow metal. But then, at least in India the alternate avenues for investment other than the gold will be clear.

The spot gold is hovering between USD 1330 and 1345 an ounce which has dropped by about 29 per cent in 2013. The trend may again look positive, although there is an opinion which indicates a further drop in the yellow metal right to USD 1,000 an ounce…, highlighted the study.

"Whatever is the case, India would matter since even despite severe restrictions and imposition of customs duty of 10 per cent, the imports would exceed 500 tonnes this year….After a fall in the previous few months, reports indicate that gold imports rose again to 38 tonnes in January,"

Natural Gas Heads for Biggest Weekly Drop in New York Since 1996

Natural gas futures fell for a fifth day in New York and headed for the biggest weekly drop in 17 years after a government report showed a U.S. stockpile decline that was smaller than forecasts.

Natural gas for April delivery fell as much as 1.3 percent in today’s electronic trading on the New York Mercantile Exchange and was at $4.486 per million British thermal units at 10:08 a.m. inSingapore. Volume for all futures traded was 86 percent below the 100-day average. Gas is down 27 percent this week, approaching the biggest slump since December 1996, and down 9.2 percent for February.

U.S. inventories fell 95 billion cubic feet in the week ended Feb. 21 to 1.348 trillion, the Energy Information Administration said yesterday. Analyst estimates compiled by Bloomberg showed a withdrawal of 102 billion. Commodity Weather Group LLC expects normal or warmer-than-average weather for parts of the Great Plains and West March 9 through March 13.

Gold Heads for Second Monthly Advance as Haven Demand Increases

Gold headed for the first back-to-back monthly gain since August as concern that the U.S. recovery may be losing momentum and turmoil in emerging markets boosted haven demand. Assets in bullion-backed exchange-traded products were set for the first monthly increase in 14 months.

Bullion for immediate delivery was at $1,332.61 an ounce at 9:26 a.m. in Singapore from $1,331.33 yesterday. Prices are up 7 percent this month and reached a 17-week high of $1,345.46 on Feb. 26. Holdings in ETPs are up 0.3 percent in February after declining last year for the first time since the first product was introduced in 2003, data compiled by Bloomberg show.

Bullion rose 11 percent this year as U.S. data that missed estimates, including reports on factory output and retail sales, added to concern the recovery may be faltering just as the Federal Reserve tapers bond buying. Gold is the biggest gainer in 2013 after coffee and lean hogs on the Standard & Poor’s GSCI Index of 24 commodities as the cuts to stimulus precipitated a rout in emerging markets, which were further hurt by unrest in Ukraine and a slowdown inChina.

“Gold has benefited from the recent spate of U.S. data weakness, as well as haven demand coming through from what’s happening in emerging markets,” Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage, said from Shenzhen. “The stabilization of ETF flows is very encouraging for investor sentiment.”

Fed Tapering

Gold rebounded from the biggest annual drop since 1981 as Fed Chair Janet Yellen said yesterday that the central bank is “open to reconsidering” the pace of scaling back asset purchases should the economy weaken. The Federal Open Market Committee, which next meets March 18-19, announced a reduction to bond buying at each of its past two meetings.

In Ukraine, the newly elected government started working on securing international financing to avert a default as separatist tensions flare in the southern Crimea region. Deposed ex-President Viktor Yanukovych, who claims to be the country’s rightful leader, surfaced in Russia and will hold a news conference today.

Gold for April delivery was at $1,332.30 an ounce on the Comex in New York from $1,331.80 yesterday, rising for a second month. Prices climbed to $1,345.60 on Feb. 26, the highest for a most-active contract since Oct. 30.

Silver rose 0.3 percent to $21.3329 an ounce, advancing 11 percent in February for the first monthly gain since October.

Platinum lost 0.2 percent to $1,450 an ounce, trimming a third monthly increase, while palladium added 0.1 percent to $743 an ounce, set for the first month of gains in four.

India’s Diesel Subsidy Spurs Pollution Worse Than Beijing

Molecular biologist George Easow’s move toIndia to start a clinical diagnostics business lasted just three weeks before he was convinced to return to the U.K.

The convincing was done by his seven-month-old daughter Fiona. Within days of moving to New Delhi, the child was wheezing and gasping for air because of smog. “She could hardly breathe,” said her father.

Fiona was kept indoors and put on medication. Nothing worked. “We had to make a call,” Easow said, adding her symptoms disappeared once back in the U.K. and haven’t returned.

For the 16.8 million residents of India’s capital, the wheezing continues. The bad news is it’s going to get worse.

New Delhi isn’t alone as cities across the nation suffer from some of the worst air quality in the world. That’s costing the country 1.1 trillion rupees ($18 billion) in shortened life spans of productive members of the urban population each year, according to a JuneWorld Bank report.

While Beijing and Shanghai make the headlines for air pollution caused by factory smokestacks burning coal, Delhi residents get their smog right in the face from cars and trucks running on cheap diesel.

India subsidizes sales of the fuel to the equivalent of $15 billion a year, encouraging purchases of diesel vehicles that can pump out exhaust gases with 10 times the carcinogenic particles found in gasoline exhausts.

The result: Delhi’s air on average last year was laced with double the toxic particles per cubic meter being reported in Beijing, leading to respiratory diseases, lung cancer and heart attacks.

‘No Doubt’

“I have no doubt, 100 percent, that diesel exhaust is contributing to a rise in asthma, respiratory illnesses and hospitalizations,” said Dr. T.K. Joshi, director of the Centre for Occupational & Environmental Health in Delhi at Maulana Azad Medical College.

“Diesel exhaust is a carcinogen,” Joshi said in a Feb. 5 interview, referencing a report by the World Health Organization in October.

Diesel passenger vehicles accounted for 49 percent of all new cars sold in India last year, up from a third in 2008, according to theInternational Council on Clean Transportation, a not-for-profit known as the ICCT. The number of new passenger vehicles sold each year may almost double to 5 million by 2020 and the share of diesel models is surging as the fuel sells at a 24 percent discountto gasoline. Beside diesel being cheaper -- about $3.34 a gallon in Delhi -- it also provides more mileage than gasoline, adding to the economic attractions of vehicles running on the fuel.

Nine Years

In comparison, only 0.5 percent of China’s new passenger cars run on diesel, according to Germany’s Bosch Group, which makes auto exhaust cleaning systems for the fuel.

Benchmark zero-grade diesel sells in Beijing for 7.6 yuan per liter, a 6 percent premium to 89-octane gasoline, according to data compiled by Bloomberg.

India’s diesel fleet, which runs on emissions standards as much as nine years behind Europe, will remain on the roads for years to come even if tougher rules are introduced, said Anup Bandivadekar, India program director for the ICCT.

“The future implications are what make the problem so worrisome,” said Bandivadekar.

Air particulate pollution causes more than 116,000 deaths annually in India, hitting the younger, most productive members of the population the hardest, according to Muthukumara S. Mani, senior environmental economist at the World Bank.

Lethal Particles

Carmakers from Daimler AG (DAI)’s Mercedes-Benz to Maruti Suzuki India Ltd. (MSIL) to General Motors Co. (GM) have all introduced new diesel models since 2010.

In India, diesel exhaust systems don’t come with equipment mandated in Europe to scrub exhaust gases of lethal particle emissions. The reason for that comes back to the fuel itself: Oil refineries produce diesel with levels of sulfur that would ruin the exhaust-scrubbing equipment.

The automobile industry will have “no difficulty” in installing exhaust technologies once India raises emission standards and fuel quality, the Society of Indian Automobile Manufacturers said in an e-mailed response to questions.

“General Motors is committed to following all emission requirements and agrees with the Society of Indian Automobile Manufacturers,” said P. Balendran, spokesman for the automaker in India, in a Feb. 24 e-mail.

“The auto industry has been asking for a single regime of fuel and emission norms across the country,” said C.V. Raman, executive director, engineering at Maruti Suzuki. A move to current European standards for the fuel would reduce emissions by as much as 80 percent from present levels, he said.

Daimler’s India unit didn’t respond to an e-mail and a phone call requesting comment.

Little Incentive

Hindustan Petroleum Corp. (HPCL), Indian Oil Corp. (IOCL)and Bharat Petroleum Corp. (BPCL), state-run oil refiners, have little incentive to invest in technology to lower sulfur in the fuel as they lose money on every gallon of diesel sold.

Upgrading one refinery to make Euro 5 equivalent fuel, Europe’s current standard, will cost 25 billion rupees ($403 million), S. Roy Choudhury, chairman of Hindustan Petroleum, said on Jan. 14.

“Diesel prices need to be increased to cut demand,” he said. “That’s the primary issue.”

Yet, the government policy of subsidizing diesel is unlikely to end soon as it would raise prices during an election year.

Like Asbestos

Diesel engines emit a pollutant known as PM2.5, or airborne particles and liquid droplets measuring less than 2.5 micrometers or one-thirtieth the width of a strand of hair.

Because they’re so small, they penetrate deep into the lungs and pass into the blood stream, according to the U.S. Environmental Protection Agency.

In October, the World Health Organization classified PM2.5 as aGroup 1 carcinogen, similar to asbestos and tobacco, saying exposure can cause lung cancer, complicate births, and increase the risk of bladder cancer. Short-term spikes can kill, triggering strokes, heart failure and asthma attacks, according to the American Lung Association.

In 2013, the annual average concentration of PM2.5 in New Delhi was 173 micrograms per cubic meter, compared with 89.5 micrograms in Beijing, according to data from India’s Central Pollution Control Board and the Beijing Municipal Environmental Monitoring Center. The threshold for average annual exposure asrecommended by the WHO is 10 micrograms.

Susheel Kumar, chairman of the government’s Central Pollution Control Board didn’t respond to e-mails and phone calls seeking comment.

Street Toxins

Fine particulate matter is also produced in India by coal-fired power plants, diesel generators, and cooking fuel.

But the major source in the cities is vehicles, said Sumit Sharma, a fellow at The Energy and Resources Institute in New Delhi.

“That’s dangerous because it’s happening closer to the breathing level of people,” said Sharma. “It’s not happening from a 220-meter high chimney but at the level of one meter.”

The World Health Organization uses data for larger, PM10 or 10-micrometer particles as a proxy. Its database for 2003 to 2010 shows annual average pollution in Delhi and Mumbai exceeded that of Beijing and Shanghai.

Anumita Roychowdhury, head of the air pollution program at the Centre for Science and Environment think-tank in New Delhi, agrees on the reason why: “The diesel subsidies have filled up your city with millions of tail pipes spewing carcinogens.”