OPEC Might Meet Again Before March, Venezuela Says

Dec. 23 (Bloomberg) -- The Organization of Petroleum Exporting Countries may hold an emergency meeting before its next scheduled meeting in March, Venezuelan Energy Minister Rafael Ramirez said.

Ramirez, who was attending a summit of gas-producing nations in Moscow, didn’t say exactly where or when such an oil meeting might take place.

Four days ago, OPEC President Chakib Khelil said OPEC may meet in Kuwait City on Jan. 19 to discuss further production cuts, adding that OPEC will continue to reduce supply as demand falls until an “equilibrium” is reached.

The potential Kuwait meeting may coincide with a meeting of Middle East leaders in that city, according to Khelil. The oil group’s meeting is currently scheduled for March 15 in Vienna.

OPEC decided on Dec. 17 to deepen existing supply cuts, and set a production limit for 11 of its members at 24.845 million barrels a day, which would be 4.2 million barrels a day less than it pumped in September, according to figures published by OPEC.

Asked about the potential for coordinating natural gas supply, Ramirez today said: “When the gas market is more developed worldwide, perhaps we’ll have more instruments to regulate the market.”

Gold Falls as Commodity Slump Damps Inflation Concern

Dec. 23 (Bloomberg) -- Gold prices fell on speculation that a drop in commodity costs will damp demand for precious metals as a hedge against inflation. Silver and platinum also declined.

The Reuters/Jefferies CRB Index of 19 raw materials is down for a fifth straight session, heading for the biggest annual decline ever. Crude oil, gasoline, corn, soybeans, wheat and copper have tumbled from records in 2008. Gold has dropped 19 percent from the all-time high of $1,033.90 an ounce in March.

“Future inflationary pressures are weakening, and that’s putting a damper on gold,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “Inflation is dissipating as crude oil continues to work its way lower.”

Gold futures for February delivery fell $9.10, or 1.1 percent, to $838.10 an ounce on the Comex division of the New York Mercantile Exchange. The price is little changed this year.

Silver futures for March delivery slid 60 cents, or 5.5 percent, to $10.26 an ounce on the Comex, the biggest drop since Dec. 1. The most-active contract has fallen 31 percent this year.

Platinum futures for April delivery dropped $10.70, or 1.2 percent, to $850.50 an ounce on the Nymex. Palladium for March delivery was little changed at $174.70 an ounce.

Gold rallied 31 percent last year as inflation rose at the fastest rate in almost two decades. Consumer prices dropped 1.7 percent in November, the most on record, as energy costs plunged. Crude-oil futures have plummeted 73 percent to less than $40 a barrel in New York from a record $147.27 in July.

Haven Demand

Still, gold may rebound should a deepening recession boost demand for the metal as a haven, said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.

“There’s still a group of traders worried that a recession will turn into a depression,” Pawlicki said. “They’re using gold as a source of safe haven.”

The U.S. fell into a recession in December 2007, according to the National Bureau of Economic Research in Cambridge, Massachusetts, the arbiter of the country’s business cycles.

Platinum may rally should the government’s bailout of General Motors Corp. and Chrysler LLC keep the U.S. auto industry from collapsing. Both platinum and palladium are used in pollution-control devices in cars and trucks.

“Platinum is a market based on the health of the auto industry,” Pawlicki said.

Platinum has dropped 44 percent this year. The price reached a record $2,308.80 in March. Palladium has plunged 54 percent in 2008.

Dec. 24 (Bloomberg) -- The yen traded near a one-week low versus the dollar as a drop in a gauge of currency swings increased the appeal of purchasin

Dec. 24 (Bloomberg) -- Crude oil rose in light holiday trading after dropping yesterday on signs that the economy of the U.S., the world’s biggest oil consumer, may contract further.

Crude declined as much as 5.3 percent yesterday, extending its slide from a record $147.27 a barrel in July. The median resale price of homes fell 13 percent, probably the largest drop since the Great Depression, National Association of Realtors Chief Economist Lawrence Yun said in Washington.

“The primary factor that’s been guiding the market is concern about demand,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut. “We are searching for where the bottom to this record slide is.”

Oil for February delivery rose 24 cents, or 0.6 percent, to $39.22 a barrel at 10:16 a.m. Sydney time on the New York Mercantile Exchange. Prices are down 59 percent this year. Yesterday, oil fell 93 cents, or 2.3 percent, to close at $38.98 a barrel.

Oil for delivery in February 2010 was more than $14 higher than the current month yesterday, a market condition known as contango. The pattern encourages companies to increase supplies.

U.S. crude-oil stockpiles probably increased 500,000 barrels in the week ended Dec. 19 from 321.3 million the week before, according to the median of responses in a Bloomberg News survey before an Energy Department report today. It would be the 12th gain in 13 weeks, also an indication that demand is falling.

‘Strong Contango’

“The strong contango is providing a strong incentive for people to put oil in storage and discourages financial investors that had such a big role in the run-up in prices,” said Guy Caruso, senior adviser with the Energy and National Security programs at the Center for Strategic and International Studies in Washington.

The Energy Department is scheduled to release its next inventory report at 10:35 a.m. today in Washington.

“We are seeing the reverse of what happened in the first half of 2008, when prices surged,” said Caruso, who was administrator of the Energy Information Administration, the statistical arm of the Energy Department, from 2002 until September.

Sales of new homes in the U.S. fell 2.9 percent last month to a 17-year low of 407,000, the Commerce Department said yesterday in Washington. The median sales price declined 11.5 percent from a year earlier to $220,400.

“I doubt there will be much strength in the energy markets as long as people are worried about losing their jobs and paying their bills,” McGillian said.

Shrinking Economy

The U.S. economy shrank in the third quarter at a 0.5 percent annual rate, the worst since 2001, according to revised figures from the Commerce Department.

The Gross Domestic Product numbers “are in line with expectations,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “Now the question is how long it will be before the economy recovers or at least stops its decline.”

Prices may be more volatile this week because many traders are taking time off for the Christmas holidays.

“Volume is declining by the day,” Barakat said.

Volume in electronic trading on the exchange was 232,352 contracts, as of 3:13 p.m. in New York yesterday. Volume totaled 287,570 contracts Dec. 22, down 42 percent from the average over the past 3 months. Open interest Dec. 22 was 1.14 million contracts. The exchange has a one-day delay in reporting open interest and full volume data.

OPEC Response

The Organization of Petroleum Exporting Countries announced a record production cut last week in response to collapsing demand as a result of the economic slowdown. The group may hold an emergency meeting before its next scheduled gathering in March, Venezuelan Energy Minister Rafael Ramirez said yesterday.

Ramirez, who was attending a summit of gas-producing nations in Moscow, didn’t say exactly where or when such an oil meeting might take place.

OPEC President Chakib Khelil said four days ago that OPEC may meet in Kuwait City on Jan. 19 to discuss further production cuts, adding that OPEC will continue to reduce supply as demand falls until an “equilibrium” is reached.

Brent crude oil for February settlement declined $1.09, or 2.6 percent, to $40.36 a barrel on London’s ICE Futures Europe exchange.

Yen Trades Near One-Week Low Versus Dollar as Volatility Drops

Dec. 24 (Bloomberg) -- The yen traded near a one-week low versus the dollar as a drop in a gauge of currency swings increased the appeal of purchasing higher-yielding assets at the expense of the Japanese currency.

The yen declined against the euro, the Brazilian real and the Canadian dollar yesterday on speculation some investors returned to carry trades. Britain’s pound approached the record low against the euro as reports showed the economy shrank more than originally projected in the third quarter and mortgage-loan approvals slumped.

“We have a slightly better tone for buying the dollar- yen,” said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York.

The yen traded at 90.97 per dollar at 7:03 a.m. in Tokyo, after falling 0.8 percent yesterday when it touched 90.92, the weakest level since Dec. 15. The yen has declined from a 13-year high of 87.14 set on Dec. 17. The Japanese currency was at 126.64 per euro, following a 0.7 percent decline yesterday. The dollar was little changed at $1.3922 per euro. It dropped to $1.4719 on Dec. 18, the weakest level since Sept. 25.

The pound declined 0.8 percent to 94.77 pence per euro yesterday as the U.K.’s Office for National Statistics said the economy shrank 0.6 percent in the third quarter, the most since 1990. It fell to 95.57 pence on Dec. 18, the all-time low since the 15-nation European currency’s debut in 1999.

The pound has lost almost a quarter of its value against the currencies of the U.K.’s biggest trade partners this year, according to the Bank of England’s effective exchange rate. Sterling may weaken to parity with the euro for the first time as early as next week, according to Bank of New York Mellon Corp.

Implied Volatiity

The yen depreciated 1.2 percent to 38.16 against the Brazilian real yesterday and fell 0.9 percent to 74.55 versus the Canadian dollar on increased demand for carry trade where investors sell the low-yielding currencies and use the proceeds to buy higher-yielding assets. The Bank of Japan cut its benchmark interest rate last week to 0.1 percent from 0.3 percent. Brazil’s main rate is 13.75 percent and Canada’s rate is 1.5 percent.

Implied volatility on one-month euro-yen options touched 22.29 percent yesterday, the lowest level since Oct. 21. Lower volatility increases the appeal of carry trades by making profit from interest-rate differentials more predictable.

The Japanese yen has gained 23 percent against the dollar this year, heading for its largest annual increase in more than two decades amid speculation the credit crisis will deepen. It rose 28 percent against the euro and 66 percent versus the pound.

‘Extreme Risk Aversion’

“I can see the yen coming off the highs as the market moves away from extreme risk-averse tones,” said Mark Frey, head trader in Victoria, British Columbia, at Custom House, a currency brokerage with 50,000 corporate accounts.

The U.S. dollar fluctuated between a loss and a gain yesterday, as investors balanced their trading positions before year-end, said Dustin Reid, director of currency strategy at RBS Global Banking & Markets in Chicago.

The dollar fell to a three-month low versus the euro last week as the Federal Reserve cut the target lending rate to between zero and 0.25 percent from 1 percent, and said it may keep rates low for “some time” while considering potential benefits of buying longer-term Treasury securities.

“In the short term, we’ve found the equilibrium,” said Sebastien Galy, a currency strategist at BNP Paribas Securities SA in New York. “Eventually, the European economy will have more trouble. There’s a motive to sell the euro when the New Year begins.” The dollar may rise to $1.30 per euro in the next few months, according to Galy.

For the year, the dollar strengthened 4.1 percent against the euro, 34 percent versus the British pound and 28 percent against the Australian dollar as investors sold riskier assets and repay dollar-denominated loans.