Friday, July 07, 2006

The week in commodities

Just wanted to run down some recent interesting news concerning commodities and related investments. Here's what we've got:


Prices have been edging higher lately, back up towards the $75 mark. Frederic Lassare of Societe Generale says that with another hurricane season around the corner, oil prices are poised to set a new record. This, combined with global tensions/risks "will send crude through $80 a barrel toward our technical target of $83".

Meanwhile, Rosneft prepares for its upcoming IPO and recent reports claim the issue is now oversubscribed. India's state-run ONGC Videsh is considering a $3 billion investment in Rosneft, giving it a 4.5-5 percent stake, according to a recent report at India

Many of the leading oil & gas firms have been considering an investment in Rosneft, but it is the Asians who seem most eager to buy in, despite the risk. China and India are clearly trying to step up their efforts to lock in their "energy security" needs and secure what's left of the dwindling fossil-fuel resources worldwide.


U308 Speculation. A uranium owning trust is looking to go public in London later this month, according to a recent report in the Financial Times. Nufcor Uranium plans to raise $120 million in a float on the AIM and buy physical uranium with some of the proceeds.

You can read more at the Guardian under the heading, "Going Nuclear". The article doesn't mention it, but there is already a similar uranium proxy listed on the Toronto Exchange. It's named Uranium Participation Corp. and trades under the symbol U.TO.

Agriculture and Biofuels

Also seen in the Financial Times: "Use of crops for fuel production helps trading volumes soar". Open interest in Dec 08 corn contract (CBOT) has increased from 409 at the start of the year to about 35,000 at present. A lot of people latching on to the crops as fuel story, first with sugar in Brazil and now corn here in America.

I'm not sure how long this enthusiasm will last however, as more people are waking up to the fact that corn-based ethanol is not all it's cracked up to be. From my understanding, corn ethanol production is an energy-losing process and an inefficient choice from an economic standpoint, as well.

While corn based ethanol is the politically appealing option at the moment (corn farmers and producers benefit, while Americans believe they are supporting farmers in the Midwest rather than oil-shieks in the Middle East), some believe that successful commercialization of cellulose ethanol would create a more efficient source of energy. Here's a recent look at the ethanol debate from