| CommStock Israel Investor Insights Newsletter
Monday, December 1, 2008
1) OPEC to wait on output cut decision
After Cairo meeting, cartel
president says decision on whether to cut production will wait
until Algeria session in December.
Last Updated: November 29, 2008: 12:30 PM ET
CAIRO, Egypt (AP) -- OPEC ended a hastily convened meeting
in Cairo Saturday without announcing new output cuts, despite the
steep drop in crude prices and the threat it poses to member governments'
national budgets.
The oil producing group's president, Chakib Khelil,
said OPEC will wait until a meeting in Algeria on Dec. 17 to decide
whether to cut additional crude supplies from the market.
Khelil says oil ministers of the Organization of Petroleum
Exporting Countries "agreed to take any additional action on 17th
of December to balance supply and demand."
His comments came after the group convened what it called
a consultative meeting in Cairo to take stock of market situations
and to asses whether members were complying with a 1.5 million
barrel-per-day output cut announced Oct. 24 in Vienna, Austria.
Khelil said preliminary data indicates members are complying
The meeting took place after Saudi Arabia's king said
the price of oil should be $75 a barrel, much higher than it is
now.
Saudi Oil Minister Ali Naimi said the Organization of
Petroleum Exporting Countries will "do what needs to be done" to
shore up falling oil prices when the cartel meets in Algeria.
His comments came after Saudi King Abdullah told the
Kuwaiti newspaper Al-Seyassah in an interview published
Saturday that oil should be priced at $75 a barrel.
"We believe the fair price for oil is $75 a barrel," he
said, without saying how the price could be raised.
The price of crude stood at about $147 a barrel in mid-July.
On Friday, the U.S. benchmark West Texas Intermediate crude for
January delivery was trading at about $54 per barrel.
The king was echoed by Qatar's Oil Minister Abdullah
Bin Hamad al-Attiya, who told the Arab news channel Al-Arabiya
that prices needed to rise to guarantee investment into the oil
sector.
"The price between 70 to 80 (dollars a barrel) is the
one encouraging in investment and developing new or current oil
fields," he said. "It falls below 70 (dollars), the investment
would freeze, which will lead to a crisis in supply in the future."
The cartel has already held an emergency meeting in
Vienna on Oct. 24 to announce a production cut of 1.5 million barrels
per day.
The cut failed to stop the price drop, and the cartel
hastily convened the Cairo gathering on the sidelines of the Organization
of Arab Petroleum Exporting Countries' meeting.
"There is total confusion" among OPEC's 13 members,
said Fadel Gheit, managing director of oil and gas research at
Oppenheimer & Co. in New York. "These people ... really have
no business model. They basically thrive when oil prices go up,
and now they are crying uncle when prices go down."
And down they have gone, in an avalanche sped along
by a world financial meltdown that also threatens to cut deeply
into OPEC member states' government budgets.
Kuwait's oil minister, Mohammed al-Aleem, said current
prices could undercut investment in future projects and were not
good for either producers or consumers.
The recent price drop has left OPEC price hawks Venezuela
and Iran clamoring for further reductions of at least 1 million
barrels a day. Both countries need crude at about $90 per barrel
to meet spending needs aimed in part at propping up domestically
unpopular regimes.
Other OPEC members, such as Nigeria and Ecuador, face
budget problems too, making them reluctant to implement more cuts
that might shrink revenues further.
The Saudis are better positioned to cope with the drop
in prices. The International Monetary Fund estimates Riyadh needs
crude in the range of about $50 per barrel for 2008 fiscal accounts
to break even.
OPEC itself, along with the International Energy Agency,
has significantly revised down its projections for demand growth
in 2009.
Meanwhile, global crude inventories are growing, as
evidenced by a U.S. government report showing a surprisingly large
7 million barrel build in stocks last week in the world's largest
energy consumer.
OPEC's last round of cuts would put its total production
at about 30.5 million barrels per day, according to the IEA. That
is about 500,000 barrels per day higher than the forecast call
on OPEC crude in much of 2009.
A Nov. 24 Oppenheimer research report says that for
oil to rebound to $65 a barrel, OPEC would need to cut crude production
by more than 3 million barrels per day from its September levels
- a move it called highly unlikely.
2) Commentary by David Zwebner, CEO of CommStock
Trading
U.S. Economy
Shoppers hit the stores today for the traditional sales before
Christmas, but hopes among retailers are not high. The September
eurodollars ended up .015 at 98.035.
Metals
February gold closed up $7.70 at $819.00 on concerns that the violence
in Mumbai, India will escalate the conflict between India and
Pakistan. Also, talk of more rate cuts around the world is supportive
to the price of gold.
Grains and Cotton
The USDA said that, as of last week, 2008-2009 exports of:
Corn slipped from down 37% to down 38% from a year ago.
Soybeans slipped from up 9% to up 8% from a year ago.
Wheat remained down 14% from a year ago.
Cotton improved from down 5% to down 4% from a year ago.
March cotton closed up 1.36 at 47.91, the highest close in three
weeks.
Orange juice
March orange juice closed down 2.55 cents at a new contract low
of 78.80 while the Florida crop is said to be doing well and
there is no threat of freezing temperatures in the ten-day forecast.
Energies
OPEC members meet in Cairo this weekend, but many analysts do not
expect another production cut until their following meeting on
December 17th in Algeria. February crude oil closed up .63 at
$55.82.
February natural gas ended down 22.5 cents at $6.57
with mild temperatures over most of the U.S.
Currencies
Eurostat reported that the unemployment rate increased from 7.6%
to 7.7% in October, the highest in two years. Also, consumer
prices were estimated up 2.1% in November from a year ago, down
from a 3.2% annual gain in October. There is increased talk that
the European Central Bank will cut its interest rate when it
meets on Thursday. The March euro finished down 1.76 cents at
$1.2697.
Japan's Statistics Bureau said that consumer prices
were up 1.7% in October from a year ago. The Trade Ministry added
that industrial production was down 3.1% and household spending
was down 3.8% in October. The unemployment rate, however, improved
from 4.0% to 3.7% in October, better than expected. The March yen
was down .0015 at 1.0516
David Zwebner, CEO
CommStock Trading Ltd.
Tel: +972-(0)2 624-4963
Fax: +972-(0)2 624-4876
www.ecommstock.com
3) A Fan of Forex?
Interested in reading perspectives and analyses on the
Forex market? In learning what factors affect the Forex market
every week and what to be on the lookout for? In getting trade
recommendations? Email mona@ecommstock.com to
get your copy of a weekly Forex report.
4) Closing Prices for Friday, November 28,
2008
Amidex: Amidex35 (Class No Load Shares),
$9.22; Index, 1190.90, Daily Change, .25%; “A” Shares NAV, $7.10.
Global Asset Management: Capital
Appreciation, $150.47; Composite Absolute Return, $765.55; Diversity,
$658.83; GAMCO, $516.00; Interest Trend, $165.20; Trading IV-US$
Class, $145.68; US$ Special Bond Fund, $303.15.
Invesco: Asian Equity Core, $2.61; Bond, $25.35;
Emerging Markets Bond, $13.96; European Bond, EUR 4.4332;
Gilt, GBP 12.65; Global High Income, $8.27; Japanese
Equity Core, $1.00; UK Equity, GBP 3.96.
JPMorgan Fleming: JF Eastern Smaller
Co., $48.92; JF Japan, JPY 10,457; JF Japan Equity, $9.09;
JF Japan OTC, JPY 694; JF Japan Smaller Companies, JPY
24,990; JF Japan Technology, JPY 28,030; JF Korea, $18.31;
Pacific Securities, $127.18; Pacific Smaller Companies
$12.43; Global Bond & Currency, $21.11;
JF America, $29.36; JF Europe, $24.97; JF Germany, EUR
13.97; JF Global Equity, $24.03.
PCP: North America, $10.08; Europe,
$13.33; Emerging Markets, $12.79; Balanced, $7.03; Aggressive,
$5.84.
Platinum (updated once a month – September 2008
Prices): All Weather, $130.87; Equity Plus, $88.83;
Prot. Equity Plus, $79.13; Prot. Income Plus, $84.92;
Cap. Prot. Income Plus A, $88.20.
Scottish Provident: Adventurous 1,
GBP 2.052;
Balanced 1, GBP 1.788; USD Adventurous 1, $1.359;
USD Balanced 1, $1.595; USD Cautious 1, $1.660; For
Preference: Baring GUF Eastern Europe, $53.36;
Fidelity Funds International, $21.470; Invesco Asian
Equity Core, $2.560.
CommStock Trading Ltd
PO Box 7777
Jerusalem 91077
Tel: +972-2-6244963
Fax: +972-2-625 9515
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