Energy and Natural Resources Market Radar (July 8, 2013)

Energy and Natural Resources Market Radar (July 8, 2013)

2011.10.04-platformholly
<strong>PRINTER-FRIENDLY VERSION</strong> PRINTER-FRIENDLY VERSION

Energy and Natural Resources Market Radar (July 8, 2013)

Attractive Valuations for Industrial Miners
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Strengths

  • Rallying to the highest level in 14 months, the prompt-month crude oil contract rose $1.64 to settle at $101.89 per barrel on Friday. This comes as fears of supply disruptions in the Middle East and the biggest stockpile decline this year provided support to the market. Egypt’s military announced Wednesday that Mohamed Mursi is no longer president, leading to concerns over supply through the Suez Canal. The market found additional support behind the Energy Information Administration (EIA) inventory report that showed oil stockpiles declined by 10.3 million barrels, more than four times analysts’ estimates of 2.25 million barrels.
  • Latest data shows the trend for strong U.S. car sales continued in June. U.S. car and light truck sales were 15.9 million on a seasonally adjusted annualized basis, 11 percent higher year-over-year. This is the highest such print since November 2007, before the recession began. This is positive for palladium demand, which is the dominant PGM in U.S. car catalyst; as is the trend towards larger vehicles.

Weaknesses

  • Rallying to the highest level in 14 months, the prompt-month crude oil contract rose $1.64 to settle at $101.89 per barrel on Friday. This comes as fears of supply disruptions in the Middle East and the biggest stockpile decline this year provided support to the market. Egypt’s military announced Wednesday that Mohamed Mursi is no longer president, leading to concerns over supply through the Suez Canal. The market found additional support behind the Energy Information Administration (EIA) inventory report that showed oil stockpiles declined by 10.3 million barrels, more than four times analysts’ estimates of 2.25 million barrels.
  • Latest data shows the trend for strong U.S. car sales continued in June. U.S. car and light truck sales were 15.9 million on a seasonally adjusted annualized basis, 11 percent higher year-over-year. This is the highest such print since November 2007, before the recession began. This is positive for palladium demand, which is the dominant PGM in U.S. car catalyst; as is the trend towards larger vehicles.

Opportunities

  • According to analysts at Macquarie, the latest round of monthly manufacturing purchasing managers’ indices (PMIs), published on Monday, were mixed once more, but overall the mix was better than a month ago. These point tentatively to the prospect of a modest upturn in demand for metals and bulk commodities in the coming months. PMIs in the U.S. and Japan, which rank first and third, respectively, in the world output league, increased sharply. European PMIs, while still weak, were at least moving in the right direction, with the exception of Germany. China’s PMI did drop, as anticipated, but the headline number still posted a plus-50 point reading, signalling expansion of output. Selected subindices also suggest stocks of both raw materials and finished goods continue to be reduced, while pricing pressures remain subdued.


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Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., and a Toronto, Canada native, which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure. The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories. Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.” He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies. Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.



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