Spot the nation that just had "major sanctions" handed down to it

What is fascinating is the ramp in US equities managed to catch them up to Russia's post-sanctions outperformance... before they collapsed again... almost as if someone wanted to prove that US was not suffering.

Turnover plunges 70% in first fortnight of this fiscal; CTT, NSEL effects continue to haunt.

The commodities futures market continues to reel under the twin impact of the commodities transaction tax (CTT) and the National Spot Exchange Ltd (NSEL) imbroglio. These developments, which have affected liquidity and discouraged trading, have led to a sharp dip in turnover in the market.

In the first fortnight of this month, the turnover dropped by 70 per cent to ₹2.36-lakh crore from ₹7.87-lakh crore in the corresponding year-ago period.

“Interest in commodities trading has been on a downswing ever since the CTT was imposed in July last year. The immediate effect was the trade turnover falling 40 per cent,” said an analyst.

Sliding turnover

Trade turnover during July 1-15, 2013-14 dropped to ₹4.08-lakh crore from ₹7.87-lakh crore in the first fortnight of that fiscal.

During 2013-14, the trading in commodity futures plunged to ₹101-lakh crore from a record ₹170-lakh crore in 2012-13.

The numbers relate to the six national commodity exchanges (MCX, NCDEX, MNCE, ICE, ACE and USEL) and 10 regional exchanges.

The Centre imposed a 0.01 per cent CTT from July 1, 2013 on all non-agricultural commodities such as gold, silver and metals. The CTT for a trade worth ₹1 lakh is ₹10.

350% expensive

Traders feel that the CTT has made exchanges 350 per cent more expensive. “Imposition of CTT has increased the cost of hedging and trading. Because of the high cost on commodity exchanges, small and mid-size traders are shifting to illegal (dabba) trading,” said Sandeep Jain, Director of Tradeswift Commodities.

“The NSEL imbroglio in August further brought down the turnover by another 10 per cent. It has shrunk the money available in the commodities market. Besides, the imposition of additional margins by the Forward Markets Commission, which regulates commodity trading, on various products also affected trading,” said the analyst.

Naveen Mathur, Associate Director (Commodities and Currencies) at Angel Commodities Broking, said that apart from the CTT, the NSEL episode sapped investor confidence. “Besides, the past few months we have witnessed low volatility in some of the major commodities. This, along with equity markets touching new highs, has resulted in commodities trading taking a hit,” he said.

Shift to equity

There has been a shift towards the equity market as the Sensex rises with each passing day, said a trader. The Sensex had surged to record 22,939.31 last week before retreating to 22,631 on Monday.

Genuine physical market hedgers and international reference jobbers are also missing from the commodities exchanges. “Only small-time jobbers and traders are left, and this particular category of participants needs volatility to trade, which has been missing for quite some time,” he said. Commodities trading saw some improvement during January-March after the additional margins were removed.

Besides, the Forward Markets Commission permitted high-frequency trading in mini- and micro-contracts from January. “These improved trading before the interest waned in the first fortnight of April,” said the analyst. During January 16-31, trading on the commodities exchanges increased to ₹3.74-lakh crore from ₹2.77-lakh crore during December 16-31. In the first fortnight of March, the turnover was ₹3.43-lakh crore.

Poll effect

Elections and non-participation of industrial hedgers, too, are affecting commodity trading. Also, prices of key commodities such as gold, crude oil, and metals are ruling flat, leading to lack of interest among the trading community.

According to Vandana Bharti, Assistant Vice-President (Commodities) at SMC Global Securities, “If a stable government is elected, then we may see some increase in the prices of base metals and energy products. The bullion counter may see some decline as the haven appeal will decline. Further, if the newly-elected government goes for an import duty cut, then we may see a further decline in bullion prices.”

Shale Boom Sends U.S. Crude Supply to Highest Since 1930s

The U.S. is stockpiling the most crude since the Great Depression, thanks to the shale boom that has boosted production to the most in 26 years.

Inventories rose 3.52 million barrels last week to 397.7 million, the highest level since 1931, according to Energy Information Administration data going back to 1920. Crude output climbed 59,000 barrels a day to 8.36 million, the most since January 1988, as the combination of horizontal drilling and hydraulic fracturing, or fracking, unlocked supplies from shale formations in the central U.S., including the Bakken in North Dakota and the Eagle Ford in Texas.

The burgeoning supply has sparked arguments over whether a 1975 law that prevents most U.S. crude exports should be repealed. It also may reduce the impetus for a quick approval of the Keystone XL pipeline moving Canadian crude to the U.S. Average weekly imports are down 3.7 percent so far this year, compared with the same period in 2013.

“This paints a secure supply picture for the U.S.,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “This will add to the political debate about exports and Keystone. Whatever issues arise, it’s important to remember you would rather deal with the problems of a supply glut rather than a dearth.”

Keystone XL

President Barack Obama’s administration said on April 18 that it will postpone a ruling on Keystone XL. The State Department said it wouldn’t make a recommendation until questions are resolved about the way the pipeline’s northern route through Nebraska was approved. The southern portion of the project began moving crude in January to the Texas Gulf Coast from Cushing, Oklahoma.

Inventories along the Gulf Coast, known as PADD 3, rose 2.44 million barrels to 209.6 million last week, the most in EIA data going back to 1990.

Much of that inventory is light, sweet crude, or oil with low density and sulfur content, from the shale fields. Many refineries along the Gulf Coast are designed to run most efficiently on cheaper heavy, sour barrels imported from Mexico and Venezuela.

“The problem is that we have a glut of light, sweet crude when what we need is sour,” Schork said. “There have to find a way to swap the barrels we’ve got in hand or exporting them, so we can take full advantage of the rise in output.”

Energy Independence

Harold Hamm, the chairman and chief executive officer of Continental Resources Inc. (CLR), who became a billionaire drilling in North Dakota, told U.S. lawmakers Jan. 30 that the country, which EIA data show supplied 86 percent of its own energy last year, can drill its way to full independence by 2020. Hamm is leading an effort to get Congress to allow crude exports for the first time since the 1970s.

Senator Lisa Murkowski of Alaska, the senior Republican on the Energy and Natural Resources Committee, said in a Jan. 7 speech that she also supports changing the export rules.

The federal Jones Act restricts domestic seaborne trade to vessels owned, flagged and built in the U.S. and crewed by citizens. Thirteen tankers can haul crude domestically out of a global fleet of about 2,400, according to the U.S. Transportation Department’s Maritime Administration. The Jones Act is a 94-year-old law.

WTI Slips

West Texas Intermediate crude for June delivery slipped 31 cents, or 0.3 percent, to settle at $101.44 a barrel on the New York Mercantile Exchange. Futures ended trading at $104.37 a barrel on April 21, the second-highest level of 2014.

The U.S. inventory level was the highest in EIA weekly data begun in 1982 and monthly government data going back to 1920. Reports before 1976 were based on data from the Bureau of Mines, according to the EIA, and stockpiles of Alaskan crude oil in transit were included starting in 1981.

Imports decreased 475,000 barrels a day to 7.8 million in the seven days ended April 18. Arrivals have averaged 7.46 million barrels in 2014, according to EIA figures, down from 7.74 million for the first 16 weeks of 2013.

“Imports remain strong,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We’ve yet to waive off imports but may be nearing a breaking point because of swollen supplies along the Gulf Coast. When that occurs, there will be a major rebalancing of global markets.”

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

Commodities futures trade volumes fall for second year

(Reuters) – Commodity futures trading volumes in India fell 40.49 percent in the year to March 2014, its second straight year of decline, the market regulator said on Tuesday.

In value terms, futures trading at commodity exchanges fell to 101.44 trillion rupees in the first twelve months from April 2013 from 170.46 trillion rupees a year ago, the Forward Markets Commission said in a statement on its website.

Trading in gold bullion fell more than 25 percent to 43 trillion rupees in the year to March 2014, from 78 trillion rupees in the same period last year. Metals volumes fell 46 percent to 17 trillion rupees, and volumes in agricultural commodities fell 25 percent to 16 trillion rupees.

The plunge in volumes and lack of fresh capital is expected to cause at least one national-level exchange, the Indian Commodity Exchange controlled by Reliance Capital (NSI:RELCAPITAL), to shut down.

The world’s second-biggest buyer of gold and second-biggest producer of wheat, India allowed commodities futures trading only in 2003. But enthusiasm has dried up since a scam was unearthed last July at the National Spot Exchange owned by Financial Technologies India, which also owns the largest exchange, the Multi Commodity Exchange (MCEI.NS).

In addition, also last July, India levied a Commodities Transaction Tax (CTT) of 0.01 percent on trade of all non-agricultural commodities futures and a few agricultural commodities futures, and increased restrictions on imports of bullion.

“The very first jolt was that when CTT was introduced and then the NSEL fiasco,” said Haresh Galipelli, vice-president, Inditrade Derivatives and Commodities in Hyderabad.

“We have already seen peaking of retail participation and for the market to reach new level, we need more participation of banks, institutions….”

India has 21 commodity bourses, including six operating at the national level, trading about 80 commodities ranging from gold to carbon credits. Foreigners are still not allowed to trade in futures, but can buy stakes in the exchanges.

“Consolidation will continue in commodity trading unless we pass the FCRA (Forward Contract Amendment Bill) and launch innovative products like options,” Galipelli said.

The bill has been pending in parliament for a decade.

Massing Of 15,000 Ukraine Troops, Hundreds Of Tanks Around Slavyansk - Satellite Images

Russian RIA Novosti reports that it has received satellite photos, "which clearly show the accumulation of a large number of Ukrainian military equipment and weapons on the border with the Russian Federation and in the vicinity of Slavyasnk." RIA cites a source in the Russian Defense Ministry, who commented that the pictures show a military formation designed "to wipe out the city and all its inhabitants from the face of the earth."

According to source, the group has more than 15,000 troops from the Ukraine army and national guard, about 160 tanks, 230 infantry fighting vehicles and APCs, and as much as 150 mortars, howitzers and multiple launch rocket systems ("Grad" and "Smerch").

The source concludes that "This concentration of troops in one area is not compatible with the potential of self-defense forces, armed with only a small number of pistols and submachine guns."

The satellite images are below:

It goes without saying that a matching build up (or at least an attempt at one) by Ukraine is normal and to be expected. The problem is that as we have witnessed every day over the past two weeks, military provocations on both sides of the conflict happen every day if not every hour. The latest one happened moments ago, as reported by RT:

Unknown assailants landed in helicopters and attacked a checkpoint in Soledar city in eastern Ukraine’s Donetsk region, a militia source told RIA Novosti adding that there is a fight going on. There is no information on the number of casualties.

Soledar is located about 30 kilometers south east of Slavyansk.

The people’s governor of Donbass region Denis Pushilin confirmed to RT that there is fighting in Soledar. As the unknown men attacked the checkpoint, the militia was forced to retreat, the source told RIA.

The second checkpoint is preparing for attack he said, adding that there are about 50 activists, many without weapons.

For now these skirmishes around "checkpoints" have been isolated events. But how long before the Ukraine "special forces" which may well amount to 15,000 troops as reported by Russian media, get involved. And how much longer after that until Russia retaliats. But the biggest question: who will be the agent provocateur who fires the first shot in hopes of launch an all out war? Indeed, who stands to gain the most from yet another war - one which will hardly be "contained"

Higher Gold Prices Seen In Weekly Survey - Kitco News

Concerns about potential escalation in the situation between Ukraine and Russia, plus a move back above certain technical chart levels, should support gold prices next week, a majority of participants said in the weekly Kitco News Gold Survey.

Out of 33 participants, 19 responded this week. Twelve see prices up, while four see prices down and three see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.

A few see prices range-bound. “(It’s a) tough call this week. A strong argument could be made for all three directions. If I had to pick one, it would be sideways,” said Darin Newsom, senior analyst, DTN. “The June contract has posted a strong rally off its test of technical support at $1,265.20, and is poised for a higher weekly close. All this despite weekly Stochastics that remain bearish. This could easily set the stage for a continued rally next week back to resistance between $1,321.30 and $1,334.80. However, for arguments sake, I’ll say that the contract calms down next week and consolidates within this week’s range, so far, of $1,303.50 to $1,268.40.”

LME Will Start Position Reports on July 1 After Industry Calls

The London Metal Exchange, the world’s largest metals bourse, will start a commitment of traders report on July 1 after requests from consumers and producers to increase information about the market.

The report will be published on a weekly basis and show trader holdings each business day, the LME said in a notice to members today. It will show the composition of the LME market by category of trader, on an anonymous and aggregated basis, according to the notice.

The LME is joining NYSE Liffe and ICE Futures Europe in reporting trader positions similar to those issued by the U.S. Commodity Futures Trading Commission for U.S. exchanges. Aluminum makers including United Co. Rusal and Alcoa Inc. and beer makers last year asked the exchange to disclose holdings.

“The LME believes that the introduction of a COTR will bring benefits to the market in terms of transparency,” Nick Ong-Seng, managing director of regulation and compliance, said in the notice. Additional costs to members from the reports would be outweighed by benefits to the market, the LME said.

The exchange wants to provide more information about the market after a U.K. judge last month tossed out part of its plan to ease backlogs of metal at warehouses. The LME faces 26 U.S. lawsuits alleging long waits for metal at warehouses boosted costs. The LME is seeking views from all interested parties on the proposed report until May 23, it said.

CFTC Reports

The CFTC releases weekly reports breaking down positions by type and NYSE Liffe, the derivatives arm of NYSE Euronext, began giving similar information for agricultural products in 2011. ICE Futures Europe started publishing Commitments of Traders Reports in Europe for Brent and gasoil in 2011.

For now, the LME publishes so-called warrant holdings reports that don’t include the type of holder of a position and are delayed two days before publication.

The reports will classify market open interest by category of participant, similar to the CFTC, including producer, merchant, processor or user; broker dealer or index trader; money manager; other reportables and not defined, according to the notice.

EXAMPLE of the CFTC REPORT of COMMEX.