Reporting requirements in Europe's Securities Financing Transaction Regulation, set to take effect in 2019 for nonfinancial companies, might capture certain transactions unique to commodities that fall in a gray area outside financing, energy industry experts say. "In the general course of our business, we might do something that could look like borrowing or lending, but it might just be a way of handling certain logistics," said Peter Krusaa of Dong Energy.
The European Securities and Markets Authority is set to issue a list of commodity derivatives contracts subject to position limits. The list aims to curb speculation in food and energy prices by imposing a maximum limit on individual investors' exposure.
Swaps-trading subsidiaries of BP and Royal Dutch Shell are asking the Commodity Futures Trading Commission to change a proposal so energy firms are not subject to capital requirements that apply to banks, broker-dealers and futures commission merchants. Instead, the firms want the CFTC to use the Federal Reserve's classification for a nonﬁnancial entity.
Frustrated by the regulatory standstill created by a short-handed Commodity Futures Trading Commission, the agency's sole Democrat, Sharon Bowen, said she will step down in coming months. "Without a full complement of commissioners to consider the far-reaching implications of our decisions, we are frozen in place while the markets we regulate are moving faster every day," she says.
The Commodity Futures Trading Commission's inspector general has decided not to follow up on an audit that discovered the agency's chief economist was blocking research on politically sensitive issues, such as position limits, a policy the audit described as "institutional censorship." CFTC Deputy Inspector General Judith Ringle said the office doesn't have enough staff to pursue the matter.
Easing US regulation, as outlined in a Treasury Department report, to match international standards wouldn't equalize the playing field between US and European banks, Duncan Wood writes. "It marks a radical shift in the country's post-crisis regulatory philosophy -- from leadership to gamesmanship," he writes.
The US spring wheat crop is in its worst shape in nearly 30 years, with the Department of Agriculture reporting that only 45% of the high-protein variety grown in northern states was in good or excellent condition. A lengthy dry spell is behind the low crop rating.
Changes to trading of liquefied natural gas have increased volume in LNG futures and have spurred product development. "We have already witnessed exponential growth in Asia-based LNG swaps over the past couple of years, and counterparties are demanding that the new flexible supply from the US is underpinned by both price transparency and the means to hedge," said Shelley Kerr of S&P Global Platts.
The dollar is up, the commodities index is down and oil prices are still falling -- these are three signs that the bull market in commodities, which kicked off in May of last year, may have run its course. This report examines the factors that suggest a bear market may be on the horizon.
Major oil producers' current agreement on output cuts are sufficient to hold prices at $50 a barrel this year, but more reductions will be needed in 2018 to maintain that level, said Fereidun Fesharaki, chairman of consultants FGE. Without further reductions, new supply will exceed rising demand, and prices could fall to $30 a barrel, Fesharaki said at the International Association for Energy Economics international conference in Singapore.
Although tensions in Syria have escalated in recent days, with Russia threatening to treat US aircraft as hostile, the world's commodities markets don't seem to be paying much attention. Instead, most eyes are on the oil market, still struggling with a worldwide glut that's continuing to depress prices.
Mergers and acquisitions among exploration and production companies are starting to level off this year, says a report by Bloomberg Intelligence analysts Vincent Piazza and Daniel Krauser. Falling prices are the main issue, and just less than $8 billion in upstream transactions have been announced in the second quarter.
The Federal Reserve's interest-rate hike helped CME Group hit a record of 129 million contracts in open interest on June 14. Daily trading volume in CME's foreign exchange futures and options products hit a record 2.5 million contracts, and federal funds futures hit an all-time high of more than 907,000 contracts traded.
The Federal Reserve is preparing to whittle back its crisis-inflated balance sheet of $4.5 trillion, but by how much is an open question. CME Group's Bluford Putnam conjectures that the target number will leave the balance around 12% of GDP -- midway between the pre-crisis and post-crisis percentages.