Markets

BP, solar, De Beers, Centrica

In this week’s podcast: Interim results from BP fail to please investors; solar power – how economic is it? We ask CEO of Canadian Solar, Dr Shawn Qu; diamond company De Beers gets a new chief executive; and, Centrica – what should we expect from its results?

Presented by Sylvia Pfeifer with Vincent Boland, Pilita Clark, William MacNamara and David Blair.

Produced by LJ Filotrani

After the dot.com crash and the credit crunch, investors are being warned of the potential consequences of a ‘carbon bubble’.

Stock markets are sitting on vast reserves of fossil fuels that cannot be burnt if the world is to stick to climate change targets, according to research issued by the Carbon Tracker initiative.

Sylvia Pfeifer

George RoseThe board of Tony Hayward’s new energy fund, Vallares, which will see the former head of BP return to British corporate life, is taking shape. George Rose, the former finance director at BAE Systems, the defence contractor, is in talks to take up the position of chair of the audit committee.

If he agrees, it would be a good catch for Hayward. Rose, who stepped down from the board of BAE in March this year, was well-respected during his time at the defence company. He is currently also a non-executive director at National Grid, a position he has held since 2002, and where he chairs the audit committee, and was until recently a candidate for its chairmanship.

Wow. Turns out that in 2008 (into the mega rally time period) someone may have been “squeezing” oil after all.

As the FT reports:

The US commodities regulator has charged a trading house and two individuals with manipulating oil prices in 2008 by amassing dominant positions in the physical market that created the impression of a shortage. The charge is only the second oil manipulation case the US Commodity Futures Trading Commission has filed since launching a “nationwide crude oil investigation” three years ago as the cost of West Texas Intermediate, the US benchmark, surged towards a record high of $147 a barrel.

Having been proven right about their prediction of a rather substantial correction in commodities  earlier this month, Goldman Sachs is now out with a new view.

A bullish view.

Contrary to popular belief, analysis of the latest CFTC position data is beginning to show that it wasn’t so much the ‘froth‘ in the market that was responsible for this month’s run-up and subsequent commodity price collapse, but the professional fund community.

John Kemp at Reuters has pored over the latest data set and concluded, amongst other things that:

There were no significant changes among producers, consumers and merchants, or in the “other reporting” category. Swap dealers’ trimmed their massive short position, but that was the mirror image of long liquidation among the hedge funds and small speculators, for whom the swap dealers act as market makers and counterparties.

—–

Long liquidation in the week ending May 6 was equivalent to the mean plus two standard deviations, which was not abnormally large. There have been four larger adjustments this year alone and five in 2010, a period characterised by unusually low volatility.

Kiran Stacey

Tepco president Masataka Shimizu

Tepco president Masataka Shimizu

The news last week that the Japanese government was close to agreeing a bailout plan for Tepco, the electricity company that owns the Fukushima nuclear plant, should have come as a relief for the company and its debt holders.

But the opposite appears to be true. Amid uncertainty over the structure of the bailout and when it might finally be agreed, Moody’s has taken the proactive step of downgrading the company’s debt, saying that the plan as it looks so far actually increases the risk of a default.

The clause that particularly seems to trouble the ratings agency is the one that Tepco will only be insured for compensation payments of up to Y120bn. Anything above that limit will be the company’s liability.

Kiran Stacey

The warnings may finally be coming true. Four months after the OECD warned that the soaring oil price could damage the economic recovery in developed nations (since when Brent has advanced another 19 per cent), the IEA has noticed that global oil demand has begun to flatline.

In its March Oil Market Report, it notes the first month of near-zero growth since the summer of 2009, which was just as the recovery was getting under way.

Part of the decline in demand is because of the Japanese refinery capacity which was knocked out by the earthquake and tsunami.

The justification for Wednesday’s commodity rout is still that RBOB futures fell (or crashed) after the EIA reported larger than expected US stockbuilds in gasoline. The more than 8 per cent move, in the usually much more stable contract, saw the CME lift margins for speculators by 21.4 per cent for Thursday.

But is the RBOB situation really all that simple?

Yes, it is true that RBOB cracks — the difference between the price of gasoline and oil, which determines how much of an incentive there is for refineries to process crude — were looking more than toppish.

Just what everyone has been waiting for!

The latest thoughts from Goldman Sachs’ energy gurus on the most recent commodity mega-slide.

And don’t forget: they did predict it.

Energy Source is no longer updated but it remains open as an archive.

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