Thursday, June 7, 2012

Commodities Regains Confidence on China’s Rate Cut (USO, UNG, GLD, SLV, EXC, COP, MDR)

Commodities extended its uptrend for the second consecutive day after the Chinese central bank surprisingly reduced bank lending and deposit rates, boosting further hopes of simultaneous action to aid a struggling global economy.

The People's Bank of China said in a statement on its website it will lower benchmark one-year lending and deposit rates by 0.25 percentage point, effective from Friday. It also will begin allowing deposit rates to float higher and lending rates to float lower than under current regulations. In effect, maximum deposit rates will rise slightly after the changes, and minimum lending rates will fall sharply.

Crude for July delivery jumped +0.71% to trade at $85.62 a barrel on the New York Mercantile Exchange. Oil was up about 15 in the previous trading session. Prices for the petroleum products edged up. July gasoline added +0.46% to $2.70 a gallon and July heating oil climbed +0.40% to $2.68 a gallon. July natural gas plunged -4.25% at $2.32 per million British thermal units.

The Energy Information Administration reported that inventories of the commodity rose by 62 billion cubic feet for the week ended June 1. Analysts polled by Platts expected data to show an increase of between 53 billion cubic feet and 57 bcf. Total stocks jumped to 2.877 trillion cubic feet, up 713 billion cubic feet from the year-ago level and 687 billion cubic feet above the five-year average, from government said.

The dollar index, which measures the greenback against a basket of six major currencies, traded at 82.23, down slightly from 82.264 late Wednesday. Gold for August delivery slumped -1.74% to $1,606.20 an ounce on the Comex division of the New York Mercantile Exchange. Silver led the losses among the metals, with July silver also fell -2.57%  to $28.73 an ounce, after jumping 3.8% in the previous session.

United States Oil Fund LP (ETF)(NYSEARCA:USO) was up 0.02 (0.06%) at $32.16, SPDR Gold Trust (ETF)(NYSEARCA:GLD) fell 2.60 (-1.65%) to $154.64, iShares Silver Trust (ETF)(NYSEARCA:SLV) lost 0.79 (-2.77%) to $27.72 and United States Natural Gas Fund, LP(NYSEARCA:UNG) plunged 0.69 (-4.09%) to $16.16.
Exelon Corporation(NYSE:EXC) jumped 1.50% to $38.01 after the company forecasts FY operating EPS of $2.55-$2.85, some way below consensus of $2.98. The company is suffering from low natural gas prices that are forcing wholesale power prices lower, while warm winter weather reduced demand.
ConocoPhillips(NYSE:COP) added 1.10% as the company and Australia's Santos Ltd. sell minority stakes in the Caldita and Barossa gas discoveries offshore Australia for up to $520M to South Korea's SK Group, moving a step closer a possible expansion of the operational liquefied natural gas export plant at Darwin. Santos recently has been the subject of takeover chatter.
McDermott International(NYSE:MDR) soared 6.66% on news of large insider buying at the engineering company for oil and gas projects. CEO Stephen Johnson disclosed buying 102,368 shares on June 6 at an average price of $9.64; four executives bought a total of 175K shares worth $2.6 million.

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