WTI Trades Near Three-Month High on U.S. Supplies; Brent Steady

West Texas Intermediate traded near the highest price in three months amid speculation that crude inventories fell for a second week in the U.S., the world’s biggest oil consumer. Brent was steady in London.

Futures were little changed in New York after declining 0.1 percent yesterday. Crude stockpiles probably dropped by 2 million barrels last week to 387.5 million, a Bloomberg News survey shows before Energy Information Administration data today. OPEC nations representing 94 percent of the group’s output said they’re at ease with global supply and demand before a meeting in Vienna to decide on a collective production limit.

“Oil has been boosted by an improved growth outlook in the U.S., but it’s being contained by high supply as we start to work into the driving season,” said Ric Spooner, a chief strategist at CMC Markets in Sydney who predicts investors may sell West Texas contracts if prices rise to about $105 a barrel. “The inventory figures tonight may tell the story on how the market will handle this.”

WTI for July delivery was at $104.50 a barrel in electronic trading on the New York Mercantile Exchange, up 15 cents, at 3:38 p.m. Sydney time. The contract settled at $104.41 on June 9, the highest since March 3. The volume of all futures traded was about 45 percent below the 100-day average. Prices have increased 6.2 percent this year.

Brent for July settlement was up 22 cents at $109.74 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $5.30 to WTI. The spread narrowed for a third day yesterday to close at $5.17.

U.S. Supplies

Crude stockpiles expanded by 1.5 million barrels in the week ended June 6, the industry-funded American Petroleum Institute reported yesterday, according to TradeTheNews.com, a newswire. Supplies were at 399.4 million through April 25, the most since the Energy Department’s statistical arm started publishing weekly data in 1982.

Gasoline inventories shrank by 440,000 barrels, said the API, which collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The EIA report will probably show a gain of 1 million, according to the median estimate in the Bloomberg survey of 11 analysts.

In China, the world’s second-largest oil consumer is hoarding crude at the fastest pace in at least a decade, shielding itself from supply disruptions. Its oil imports are helping drive prices higher, according to Barclays Plc, Citigroup Inc. and Nomura Holdings Inc.

OPEC Meeting

Oil ministers from Angola, Ecuador, Kuwait and Venezuela said they anticipated that the Organization of Petroleum Exporting Countries will maintain its quota at 30 million barrels a day. Saudi Arabia, Libya, Nigeria and the United Arab Emirates said supply and demand are well-matched. Iraq’s minister said there were indications the limit would be retained, while his Iranian counterpart also expected no change.

The 10 nations accounted for about 28.2 million barrels a day of output in May, data compiled by Bloomberg show. Ministers from Algeria and Qatar declined to comment on the market or OPEC’s production yesterday. The group’s first meeting since December will be held today.

Aluminum market to end up in deficit of nearly 1.2 million mt, says Rusal

 Rusal- the world’s leading aluminum producer said Monday that the world aluminum market is likely to report a deficit of nearly 1.2 million mt by end of this year. The company also predicts that aluminum will remain bullish in near term. They further believe that the aluminum prices are currently undervalued.

According to the Russian aluminum major, there is a general conviction among the industry participants and investors that aluminum prices are currently undervalued. The company has become increasingly bullish on the near term prospects for aluminum price.

Rusal also stated that there are very little chances for capacity additions outside China beyond 2015. The global aluminum market is likely to end up in a deficit of nearly 1.2 million mt in 2014. The deficit may lower to 985,000 mt in 2015.

The new capacity additions in China will be offset by the smelters that are idled on non-profitability issues. It notes that the total capacity additions in the country during the first five months of the year totaled 2.4 million mt. However, smelter capacities to the tune of 2.1 million mt were closed during the same period, thus maintaining the balance in production.

The mineral export ban by Indonesia has reduced supplies of bauxite ore to aluminum industry. The Indonesian bauxite shipments to China have fallen drastically during the year from levels of almost 4 million mt in 2013 to just around 4 million mt during the first five months of the current year.

Based on all the above factors, Rusal forecasts the aluminum prices to touch $2,000 per mt in the next few months itself.

2013 Gold Top 10, The Producers

While year after year the list of top gold producers doesn’t change too much, it is always worth knowing which companies are at the top of the gold producer pyramid. So while it is no surprise that the likes of Barrick Gold, Newmont and Anglogold Ashanti top the 2013 gold producer list, it might be interesting to note that last year, newcomer Sibanye Gold slipped into ninth spot… in its first year of production.

The 2013 Gold and Silver Mining Focus report by Metals Focus has been released. Here is the list of 2013 top gold producers.

Barrick Gold (TSX:ABX, NYSE:ABX)

Barrick Gold produced 7.17 million ounces of gold in 2013, down 3 percent from 2012′s level of 7.42 million ounces. The company expects to produce between 6 million and 6.5 million ounces of gold in 2014, according to its 2013 annual report. Barrick had two top-producing mines in 2013: the Cortez and the Goldstrike mines tied with 0.24 million ounces of production each. The company forecasts lower production in 2014 for the Cortez mine and higher production for the Goldstrike mine.

Newmont (TSX:NMC, NYSE:NEM)

Newmont produced 5.07 million ounces of gold in 2013, an increase of 2 percent over last year’s 4.98 million ounces. The bulk of the company’s gold production in 2013 was from Nevada, where Newmont’s Juniper mill is located, as well as its Phoenix, Carlin North Area and Emigrant production sites. The mills had higher tonnage and grades in 2013, and higher leach production also contributed to the production in Nevada, according to the report. Newmont also has projects on other continents, according to its 2013 annual report.

AngloGold Ashanti (NYSE:AU)

AngloGold Ashanti produced 4.11 million ounces of gold in 2013, up 4 percent from its 2012 output of 3.94 million ounces. The company’s largest production comes from continental Africa, specifically from its Geita mine in Tanzania, where 459,000 ounces were produced in 2013. South Africa was the second most productive area for AngloGold Ashanti in 2013, with the Mponeng mine in West Wits the standout production site with 354,000 million ounces of gold. In its 2013 annual report, AngloGold Ashanti estimates it will produce between 4.2 million and 4.5 million ounces of gold in 2014.

Goldcorp (TSX:G, NYSE:GG)

Goldcorp produced 2.67 million ounces of gold in 2013, up 11 percent from 2.4 million ounces last year. The company expects to produce between 3 million and 3.15 million ounces of gold in 2014. Its top-producing mine for 2013 was the Red Lake mine, which produced 493,000 ounces of gold. Red Lake is located in Ontario, and is one of the world’s most productive gold mines, according to the company’s website.

Kinross (TSX:K,NYSE:KGC)

Kinross produced 2.55 million ounces of gold in 2013, up 5 percent from its 2012 level of 2.42 million ounces. The company expects to produce between 2.5 million and 2.7 million ounces of gold in 2014. Its most productive mine was the Kupol mine in Russia, having produced 550,188 ounces of gold in 2013. The Kupol project is in the Chukotka Autonomous Okrug of the Far East Region of the Russian federation.

Newcrest (TSX:NM, ASX:NCM)

Newcrest produced 2.36 million ounces of gold in 2013, up 14 percent from 2.07 million ounces in 2012. For the 2014 financial year, Newcrest expects to produce between 2 and 2.3 million ounces of gold, according to its 2013 annual report. Its most productive mine in 2013 was the Lihir project in Papua New Guinea, which produced 649,340 ounces of gold. According to the company’s annual report, Lihir is one of the largest gold deposits in the world.

Gold Fields (NYSE:GFI)

Gold Fields produced 1.84 million ounces of gold in 2013, a drop of 40 percent from its 3.08 million ounces of production in 2012. Gold Fields’s top producing mine in 2013 was the Cerro Corona mine in Peru, with 314,000 ounces of gold, according to its 2013 annual report. The company also operates in Australasia, South Africa and West Africa. Gold Fields forecasts production in 2014 of around 2.2 million ounces of gold, according to its annual report.

Polyus (LSE:POLG)

Russia-based gold company Polyus produced 1.65 million ounces of gold in 2013, up 5 percent from its 1.57 million ounces of the metal in 2012. Its top producing mine was Olimpiada, with 691,000 ounces of gold produced there in 2013. Olimpiada is in Eastern Siberia, Russia, and is the company’s largest single operation, according to its website.

Sibanye (NYSE:SBGL)

Sibanye produced 1.43 million ounces of gold in 2013, its first year of production. Sibanye was part of Gold Fields until 2013, and if the two companies are combined, their output increased 6 percent year-over-year, according to Moneyweb. Sibanye’s most productive project was the Driefontein operation, southwest of Johannesburg, South Africa. The mine produced a total of 6 million ounces in 2013.

Harmony Gold (NYSE:HMY)

Harmony produced 1.14 million ounces of gold in 2013, down 10 percent from 1.26 million ounces in 2012. The company expects its production will increase to between 1.3 million and 1.4 million ounces of gold in 2014. Its Target 1 mine – located, like all its projects, in South Africa - was most profitable. Mining strikes in South Africa disrupted the company’s profits and production in 2013, but this situation isn’t expected to recur in the year to come.

'Iron lady' will define future of world’s top copper producer

The future of Chile’s owned Codelco, the world’s No.1 copper producer, is said to be now in the hands of Laura Albornoz, the first woman appointed director, who played an important role in last week dismissal of CEO Thomas Keller.

“Codelco has had management issues that isn’t just down to the international price of copper,” Albornoz was quoted as saying by Bloomberg Monday. “We can take the company a lot further than where we have got it to now.”

The executive, a lawyer and former minister of the National Service for Women (Sernam), voiced her concerns on the management style at Codelco as soon as she was appointed in May.

The executive, a lawyer and former minister of the National Service for Women (Sernam), voiced her concerns on the management style at Codelco as soon as she was appointed in May.

"I have serious reservations regarding the management of Codelco, the entire administration should and will be scrutinized," she said in an interview with El Diario Financiero (in Spanish) last month.

She has said that Codelco can’t be treated like a privately held company because of the role it has in generating wealth in Chile, and how much workers feel part of the company.

“There is a very emotional bond. The perspective of a woman could bring something to the debate,” she said according to Bloomberg.

Budget decisions

As one of the newest members of Codelco’s board, Albornoz is gearing up to vote in the upcoming yearly budget, which is considered by the finance ministry every June. The copper giant invested more than $8 billion since 2012 and is expected to spend $5 billion this year. Without that investment, Keller said in January, output would drop by more than half.

Albornoz is scheduled to visit the old Chuquicamata mine next week, where relations between Keller and the workers have been at their worst.

As a state-owned company, Codelco has often been in a tug-of-war with the government over its investment budget. Of about $100bn in profits that Codelco has transferred to the state since it was nationalized in 1971, only $4bn has been returned back to the miner.

The mining company is undergoing a massive transformation, trying to maintain profits from the world's largest open-pit copper mine, Chuquicamata, by extending operations underground. At the same time, plans call for turning the world's largest underground mine, El Teniente, into an open pit operation.

But Albornoz, who implemented a program to incorporate more women into the copper industry between 2006 and 2009, seems to be more focused on resolving labour issues first.

She is scheduled to visit the old Chuquicamata mine next week, where relations between Keller and the workers have been at their worst.

And while she hasn’t given away any clues regarding who Keller’s successor will be, she told El Diario Financiero (in Spanish) it was only reasonable to think  the head of Codelco will not only have to be someone who does the job best, but also an individual “able to reflect the government program and values.

Russian producer Rusal see more gains for aluminium

Russia's Rusal believes a combination of bullish physical and technical factors that emerged in recent weeks will send the benchmark aluminium price to challenge the April peak of $1,900 a tonne this week and possibly $2,000 in the coming months.

The three-month aluminium price on the London Metal Exchange has shed a third since touching a peak of $2,803 a tonne in May 2011, weighed down by overproduction and surpluses.

But it has recovered 14 percent since touching a 4/1-2 year low in February.

United Company Rusal Plc , one of the world's biggest aluminium producers, pointed out in a statement that LME aluminium stocks have dropped to the lowest levels in 13 months.

LME stocks fell another 7,600 tonnes on Monday and have declined 5.5 percent so far this year, but are still at 5.15 million tonnes.

"The stock trends through 2014 clearly support the view that the market is in significant deficit," Rusal said.

Rusal has previously forecast that the market is expected to have a market deficit of about 1.2 million tonnes this year and a further deficit of 985,000 tonnes in 2015 due to strong demand and capacity cutbacks by producers.

Rusal also sees the declining LME cash-three month spread as indicating tighter conditions that are supporting the market. The contango - when nearby prices are weaker than forward ones - has declined to $24 a tonne from $45.50 a month ago.

"The contango represents the carrying cost for long only investors (index funds and macro hedge funds) who may be encouraged to return to the market, as well as a disincentive to market 'short' players," it said.

Copper Drops for Fifth Day Amid Metal-Warehousing Probe

Copper dropped for a fifth day on concern that a probe into inventories at Qingdao Port will reduce demand for the metal as collateral for credit in China, the world’s biggest user of the commodity.

The contract for delivery in three months on the London Metal Exchange retreated as much as 0.7 percent to $6,642 a metric ton and was at $6,662 at 4:14 p.m. in Tokyo. The metal fell 2.3 percent last week, touching $6,640 on June 6, the lowest intra-day level since May 8.

Qingdao Port is looking at whether there was multiple counting of some batches of copper used as collateral for loans, three people with direct knowledge of the investigation said last week. Chinese traders are selling copper holdings in the physical market amid the probe, and more metal will be released next week, Shanghai-based consultancy SMM Information & Technology Co. said June 6.

“Investors were very nervous to buy copper because of the Qingdao investigation,” said Kazuhiko Saito, an analyst at Fujitomi Co., a commodities broker in Tokyo. Dwindling stockpiles and indications of improvement in the Chinese and U.S. economies may limit further declines today, he said.

China’s exports rose more-than-estimated 7 percent last month, while imports fell, data showed yesterday. U.S. non-farm payrolls rose by 217,000 in May, exceeding the pre-recession peak.

Copper stockpiles tracked by exchanges in Shanghai, London and New York have dropped 47 percent this year to the lowest level since 2008.

In New York, futures for delivery in July slid 0.6 percent to $3.0315 a pound. The metal for delivery in August fell 1.8 percent to close at 47,370 yuan ($7,594) a ton on the Shanghai Futures Exchange.

On the LME, nickel and tin also dropped, while aluminum, zinc and lead advanced.

PBOC Hits Panic Button: Strengthens Currency By Most In 20 Months

On the heels of growing contagion concerns regarding shadow banking collateral and the "rehypothecation evaporation" and this weekend's 'odd' Chinese trade data (big drop in imports, no doubt impacted by dramatic commodity invoicing swings), the PBOC has fixed the Chinese currency 0.36% in the last 2 days... the biggest strengthening in the currency since October 2012. It is unclear for now exactly what is going on but we suspect the panic button outflows as banks pull credit and unwind CCFDs are forcing China's hand to offset CNY selling pressure... and of course China does it in grand style. 

China's biggest trade surplus since Jan 09... as imports tumbled 1.6% (against expectations of a 6% rise)

After weeks of weakening and comments on rising volatility and flexibity to tamp down the carry trade fervor, China has gone to the other extreme...

Whether this is to kill off the last of the momentum-chasing muppers now following the CNY weakenin trend is unclear but one thing is certain, the coincidence of such a violent move with the rising credit contagion concerns in the warehouse probes is extremely interesting.

Barclays provides some more color:

Barclays expects depreciating CNY and recent govt probe into commodity financing to continue to discourage commodity imports for arbitrage purposes, according to note yesterday; despite sizable trade surplus and FDI, PBOC’s FX purchase slowed markedly in recent mos., suggesting reduced capital inflows from other channels and signs of capital outflows

First we are told this...

• *CHINA CASH CRUNCH IN JUNE LAST YR UNLIKELY TO REPEAT: LIAN PING
• *CHINA'S OVERSUPPLY OF PROPERTY MAY LAST FOR 1 YEAR: LIAN PING

Which likely means that is exactly what they are worried about... and then Premier Li is starting to worry...

• *PREMIER LI SAYS DOWNWARD ECONOMIC PRESSURE RELATIVELY LARGE
• *LI URGES GOVT TO RESOLVE PROBLEMS OF FINANCING, EXPORTS
• *LI KEQIANG URGES GOVTS TO ENSURE CHINA TO MEET ECONOMIC GOALS
• *LI KEQIANG SAYS HE WORRIES ABOUT IMPLEMENTATION OF POLICIES

And then there's this...

• *CHINA MAY LAND SALES FALL 49% TO 62.2M SQUARE METERS: SOUFUN

So - not good then!?

And then copper crashes to Friday's lows...