Month: September 2011

Sept. 20 (Bloomberg) — Tony Morriss, head of interest-rates research in Sydney at Australia & New Zealand Banking Group Ltd., talks about Australia’s economy and central bank monetary policy. The Reserve Bank is “well placed” to respond to global and domestic economic risks or the threat of an acceleration of inflation, according to minutes of a Sept. 6 meeting when it kept interest rates unchanged. Morris also discusses Standard & Poor’s downgrade of Italy’s credit rating, and Federal Reserve policy. He speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

Sept. 20 (Bloomberg) — Hans Goetti, Singapore-based chief investment officer for Asia at Finaport Investment Intelligence, talks about the global economy, stocks and currencies. Goetti also discusses Standard & Poor’s downgrade of Italy’s credit rating, and Federal Reserve monetary policy. He speaks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

Sept. 20 (Bloomberg) — Michael Pettis, chief strategist at Guosen Securities HK, talks about the future of the European Union, the outlook for the Chinese economy and his investment strategy. Pettis speaks in Hong Kong with Bloomberg’s Susan Li, Rishaad Salamat and Phillip Yin. (Source: Bloomberg)

A New Favorite in Natural Gas Supply

by David Fessler, Investment U Senior Analyst
Tuesday, September 20, 2011: Issue #1604

By now, everyone should know about America’s abundance of natural gas. Most of the new supplies are coming primarily from the development of major shale plays.

The Marcellus, the Haynesville, the Barnett and others are examples of where most of the new gas is coming from. Once a new well is producing gas, it can’t simply be connected to the main transmission line and piped to the end user.

It has to be treated first. While processing and treating natural gas is far less complicated than processing crude oil, it’s just as necessary. Unless and until a company’s gas can get treated, it’s going nowhere.

Processing “Pipeline Quality” Natural Gas

The natural gas we use is composed almost entirely of methane. While the gas that flows from the wellhead is composed primarily of methane, it also contains numerous impurities like water vapor, carbon dioxide, helium, nitrogen, hydrogen sulfide and other substances. These must be removed.

The methane is also mixed with other hydrocarbons commonly referred to as natural gas liquids (NGLs). These include propane, butane, ethane and pentanes. Once separated from the gas, NGLs can be further processed and sold.

All of these substances must be separated and removed before the gas can be transmitted to the end user. Some processing can be done right at the wellhead, but most of the more complicated separation is accomplished at natural gas processing plants.

The diagram below, courtesy of the EIA, depicts the flow of raw wellhead gas through a typical processing flow.

Plants that process natural gas are critical links between wellhead production and end-user markets. The gas that results from the processing is termed “pipeline quality,” and can be transmitted and sold to customers.

The Growing Natural Gas Processing Sector

As production shifted from the Gulf of Mexico to onshore shale plays, additional processing facilities were built. Most of these are in areas closer to the shale plays.

As you can see from the graph below, courtesy of the Energy Information Administration (EIA), the main growth in natural gas processing plants has indeed been in non-Gulf Coast areas.

In 2009 to 2010, natural gas operators added 13.3 billion cubic feet per day (Bcfd) of processing capacity. Fully 86 percent of that was in areas away the Gulf of Mexico.

As you can see from the chart above, overall treatment capacity grew from 77.5 Bcfd to 90.8 Bcfd.

The Continued Expansion of Natural Gas Production

With the continual expansion of natural gas production in shale plays, new processing plants and pipelines will be needed in these areas to support their additional production.

The EIA reports that a potential bottleneck to increasing production from the Marcellus Shale boils down to a lack of processing facilities in the area.

Take a look at the map below, courtesy of the EIA. It shows all of the natural gas processing plants in the United States.

There’s only a handful in western Pennsylvania, the heart of the Marcellus play. Overall, total processing capacity kept up with increases in production. Many newer plants are smaller than existing ones located in the Gulf region.

The good news is that some of these plants are mobile, and can be set up in a given area to process gas, and moved when the wells are exhausted. This is an important consideration as dynamics of gas supply rapidly change with the advent of shale field production.

A Key Player in the Natural Gas Processing Market

As oil prices continue to rise, so do the prices for NGLs. That’s a real incentive for natural gas processing companies to build additional processing plants, particularly around NGL-rich plays like the Eagle Ford in Texas, the western part of the Marcellus and the newest condensate-rich play, the western part of the Utica shale in Ohio.

Who’s doing the building? Some of the larger natural gas companies, like Chesapeake Energy Corporation (NYSE: CHK), Range Resources Corporation (NYSE: RRC) and Devon Energy Corporation (NYSE: DVN), do some or all of their own processing.

But Energy Transfer Partners, L.P. (NYSE: ETP) is a little different. This limited partnership owns over 17,000 miles of pipelines, and three natural gas storage facilities.

But its real business is the processing of natural gas for other customers.

• It owns three natural gas processing plants, 17 natural gas treating facilities and 10 natural gas conditioning plants.

• Its network of processing plants and pipelines serves every major gas-producing area in the country, including all of the major shale plays.

• It’s one of America’s top three producers of propane, serving 40 states. Propane is only produced as a byproduct of natural gas processing.

In the last year, Energy Transfer Partners acquired a processing plant serving the Haynesville shale play, and announced plans to spend $300 million to construct another processing plant to serve the Eagle Ford shale play.

As America continues to use more and more natural gas, more processing capacity will need to be constructed. Energy Transfer Partners is one of the key players in the natural gas processing market, and it deserves consideration for the energy sector of your investment portfolio.

Good investing,

David Fessler

Article by Investment U

How to Play Uncertainties in the Eurozone

by Jason Jenkins, Investment U Research
Tuesday, September 20, 2011

There seemed to be a little hope mingling in the markets at the end of last week.

Global equities rose for a fourth straight day on Friday.  The Nasdaq had just finished posting its biggest weekly advance since the summer of 2009. The cherry on top came in the form of gains elsewhere in global equity markets, maybe indicating that some suggested risk aversion dissipated.

The euro had its best week versus the dollar in the last two months.

The euro found this new strength when the announcement came down that, on Thursday, the world’s leading central banks will boost short-term dollar funding for European banks facing a dollar shortage. Markets believed that there would be support from the central banks to combat any possibility of an economic disruption in Europe. And there’s also the possibility that the weekend could bring even better news from Europe after Treasury Secretary Timothy Geithner meets with European banking leaders.

However, with the optimism there still loomed some trepidation. Friday saw a sharp decline in French and Italian banking stocks. This showed that there remained a cautious tone in the market despite encouraging signs of growing efforts to resolve the debt crisis…

Monday Reality Sets In

Monday morning showed these fears were warranted…

• The Dow Jones Industrial Average markets/index was down 195 points, or 1.70 percent, at 11,313.

• The Standard & Poor’s 500 Index was down 20 points, or 1.68 percent, at 1,195.

• The Nasdaq Composite Index (Nasdaq: IXIC) fell 27 points, or 1.06 percent, at 2,594.

Over the weekend, European Union finance ministers made no headway in the sovereign debt arena, nor did they decide whether to give additional funding to the current bailout fund. Secretary Geithner drew responses from EU policymakers that ranged from lukewarm at best to testy when he encouraged them to leverage their bailout fund to deal with their debt crisis.

And once again there was Greece…

There’s an overwhelming belief now that Greece will fail, and sooner rather than later. International lenders told Greece on September 19 that it must reduce its public sector and improve tax collection to avoid default within weeks. It’s well noted that there’s not a great deal of Greek public support for the austerity measures demanded.

Secretary Geithner attempted to convey to the leadership that the “loose talk” surrounding the possible defaults of Greece and Italy do nothing but heighten the danger of the situation. A Reuters poll of more than 50 European economists gave a 65-percent chance that Greece would default. Half of those surveyed stated that it would do so within 12 months and a vast majority thought that they wouldn’t be forced out of the currency bloc. Geithner went on to say that it looks particularly bad from the outside looking in when the conflict isn’t about strategy and plan specifics but more about the member governments and the Central Bank.

How to Play Eurozone Instability

To put it short, the Eurozone isn’t on its way to a recovery or any semblance of stability.

On July 28, Investment U’s Chief Investment Strategist, Alexander Green, wrote a column recommending Market Vectors Double Short Euro ETN (NYSE: DRR) – an ETF that’s up 7 percent since that time – as a way to take advantage of Eurozone banking issues.

Yesterday, Alex recommended another way to take advantage of what he believes is an oversold and weak dollar: PowerShares DB US Dollar Index Bullish (NYSE: UUP).

And, according to Alex, both funds still have plenty of upside…

Good investing,

Jason Jenkins

Article by Investment U

Sept. 20 (Bloomberg) — Mitul Kotecha, head of global foreign exchange strategy at Credit Agricole CIB, talks about the prospect of the Bank of Korea intervening in the currency market to stem declines in the won. Kotecha also discusses the outlook for the euro, the yen, and Federal Reserve monetary policy. He speaks from Hong Kong with Owen Thomas on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

Source: ForexYard

The euro bounced off of its lows for the day despite S&P downgrading the credit rating of Italy. Today’s price action may be seen as a consolidation with markets awaiting results from the Fed’s meeting. Market players may be looking for further EUR declines as speculators have built their largest position against the EUR since early August.

The majors have been unable to find direction today as many participants are eyeing tomorrow’s FOMC statement. Expectations are for some form of “Operation Twist” with the likeliest path being the Fed purchasing US Treasuries at the long end of the curve using the proceeds from the maturing MBS the Fed holds on its balance sheet. This could be a positive for the USD if the Fed goes this route versus an expansion of the Fed’s balance sheet. This stands in contrast to the ECB, BOJ and BOE who are likely to increase their balance sheets in the near term.

The EUR was sold during the Asian trading session after S&P announced it was downgrading the sovereign debt rating of Italy, effectively beating Moody’s to the punch. But the selling pressure was not enough to send the EUR/USD below yesterday’s low which was made at the opening of the North American session. The pair found resistance at last Friday’s low of 1.3750, essentially closing the opening gap from the weekend though a close above this level on the daily chart would be needed to test the next resistance of 1.3930. The euro zone debt saga continues to drag on with the Troika talks ongoing. Things may get better before they get worse with rumors flying of a Greek exit from the EMU. The downside beckons at 1.3500 though move lower and a failure to break last week’s support would set up a double bottom, a bullish technical pattern.

According to the latest CFTC Commitment of Traders report speculators seem well positioned to test the 1.3500 level as EUR shorts have grown to their largest positioning since early August. Any consolidation could hurt weak USD longs but rising open interest suggests speculators favor further moves lower in the EUR/USD.

Read more forex trading news on our forex blog.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 20 September, 08:30 EDT

U.S. DOLLAR gold prices rose to $1795 per ounce Tuesday morning in London – still 0.9% down for the week – while stock and commodity markets also gained despite yesterday’s news of an Italian credit rating downgrade.

A day earlier, US stock markets fell, while gold prices lost 2% in less than hour.

“With market confidence in equities undermined…it was surprising that gold found so little support [on Monday],” says one London bullion dealer.

“The technical picture is bearish,” note technical analysts from bullion bank Scotia Mocatta, adding that there is risk of “a deeper correction” towards $1704.

Silver prices meantime hit a low of $39.24 per ounce – their lowest level in nearly four weeks. Ratings agency Standard & Poor’s lowered its credit rating on Italian government debt on Monday – knocking it down one notch from A+ to A.

“The downgrade reflects our view of Italy’s weakening economic growth prospects,” said a statement from S&P.

The ratings agency also cited “Italy’s fragile governing coalition and policy differences within parliament” as factors.

Italy’s downgrade is “a reminder that we’ve had the market in control,” reckons Adrian Foster, Hong Kong-based head of financial market research Asia at Rabobank.

“Policymakers across the Eurozone have been well and truly asleep at the wheel.”

Italy’s parliament last week approved €54 billion of austerity measures. Moody’s, another ratings agency, says Rome’s austerity package – which includes cuts to local government budgets – is “credit negative”, meaning Moody’s is more rather than less likely to follow S&P and cut Italy’s rating.

Italy’s public sector debt, at around €1.9 trillion, is 120% of the country’s annual gross domestic product.

The costs of buying credit default swaps – a form of bond insurance – for Italy and Germany hit record highs on Tuesday morning, news agency Bloomberg reports.

“People wonder if there are going to be more bailouts and support, and what does this actually mean for the underlying credit quality of Germany,” explains Anke Richter, London-based credit strategist at Mizuho International.

Elsewhere in Europe, Greece “will have to do more” to cut its deficit, according to a senior

European official quoted by the Financial Times on Tuesday.

Representatives of the so-called troika of lenders – the European Central Bank, European Union and International Monetary Fund – are due to continue discussions with the authorities in Athens on Tuesday, with a view to deciding whether or not it should receive its next bailout installment – worth around €8 billion.

Unless it receives the next slice of funding, the Greek government estimates it will run out of money in three weeks.

The IMF reportedly wants Greece to step up efforts to prevent tax evasion, rather than simply raise taxes. It also wants Greece’s Socialist government to dramatically cut the size of the public sector. On the currency markets, the Euro is down nearly 4% since the start of the month. Over the same period, Euro gold prices are up 3%, to around €42,100 per kilo (€1310 per ounce).

“There is scope for gold to rally as Europe’s problems cannot be settled overnight,” says Zhang Qian, analyst at China’s largest brokerage Haitong Futures.

“As for the US, there still aren’t clear signs that the economy there is healthy.”

The Federal Open Market Committee begins its two-day meeting in Washington later today to decide US monetary policy.

“One major threat to gold remains the announcement, or at least the suggestion, of further stimulus by the Fed,” says a note from Swiss refiner MKS.

“It is believed that the US stimulus program will be boosted by buying longer-dated US government debt. This in turn may be dangerous for gold prices potentially putting downward pressure on the prices.”

Gold output in China meantime fell 7.1% in July compared to the previous month to 30.083 tonnes, according to official figures published by China’s Ministry of Industry and Information Technology on Tuesday.

Gold mining production dropped to around 25.9 tonnes – a near 7.2% fall for the month. Smelting production meantime fell below 4.2 tonnes – a near 6.9% monthly drop.

Ben Traynor
BullionVault

Gold value calculator | Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Source: ForexYard

In a pledge to keep the budget balanced as the economy experiences reduced growth, Swedish Finance Minister Anders Borg hinted that a budget crisis may be underway for fiscal year 2012. Economists were not expecting Sweden to get hit very hard by the downturn in Europe, but some adjustments have been made.

The Swedes have kept a budget surplus of roughly 0.1% over the past fiscal year, and the pledge Borg made was in trying to keep this surplus intact through what is anticipated to be a sluggish period. He noted that monetary measures made over the past 12 months have given the Riksbank room to maneuver should financials get tight.

It should be remembered that Sweden was briefly in a period where it was hiking interest rates at every meeting. Should a crisis emerge, those rates can be reduced back to where they were just one year ago. Though this would undoubtedly harm Sweden’s economic and business outlook and optimism levels, it would do the job at keeping the krona (SEK) strong.

Read more forex trading news on our forex blog.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

Expected declines in the housing sector of the United States did not materialize this week. Many economists had expected housing reports to show a bit of a dip this quarter in home sales and building permits, but so far the data has held steady.

Today’s release of Building Permits gave capital investors reason to feel secure as the figure was slightly better than many were anticipating. The Housing Starts gauge, however, did fall mildly below its expected mark, but not sufficiently enough to warrant concern.

Read more forex trading news on our forex blog.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.