Posts for Ticker ‘DBO’

Big Ben Talks Down The Dollar

Friday’s surprisingly strong job report sent the dollar soaring (NYSE: FXE, FXB, FXA, FXY).  Skittish currency traders got the impression that the improvement in the job market might prompt the Fed to raise interest rates earlier than expected.  This prompted a nearly 5% decline in the price of gold (NYSE: GLD), as well as a decline in the price of oil (NYSE: DBO).  This morning all markets waited with bated breath to see what Ben Bernanke would have to say during his speech at the Economic Club of Washington.

As anticipated Mr. Bernanke cautioned the market not to jump the gun.  In the conclusion of his speech he said, “The improvement in financial conditions this year and the resumption of growth over the summer offer the hope and expectation of continued recover in the new year.  However, significant headwinds remain, including tight credit conditions and a weak job market.”  It is clear from the subsequent decline in the dollars and the rise in the S&P and gold and the markets got the message.  Its going to take more than a month’s worth of solid job data before Bernanke is going to turn his eye to inflation.

Garrett W. McIntyre

Posted on: December 7, 2009 – 1:48 pm in Economy, , , , , , , , , , ,

U.S. Oil Stockspiles Increase More Than Expected

Today’s EIA Petroleum Status Report for last week shows oil inventories to have grown 1.8 million barrels.  Many analysts expected the number to have grown by 1 million barrels.  Oil futures were down ahead of the report, largely on the strength of the dollars.  

U.S. Oil Stock, January 1st 2009 through November 6th 2009

Oil Reserves

Weekly U.S Spot Prices, January 1st 2009 through October 30th 2009

U.S. Oil Spot Price 11

Oil prices have been on the rise since October.  This price movement have been supported by a number of factors.  Perhaps the strongest among them has been the decline in the dollar against the currencies of its major trading partners, as oil is denominated in dollars.  Since the beginning of October the dollar has declined over 2% against the Euro, enhancing European demand for oil.  Oil prices have also been given a boost by the recent G-20 meeting where economic policy markers from the worlds richest 20 countries indicated they would continue their fiscal and monetary stimulus.  Also, the IEA recently revised their projections for global oil demand, citing powerful growth in China.  

Garrett W. McIntyre

Posted on: November 12, 2009 – 11:23 am in Economy, International Markets, Oil & Gas, , ,

ETFs/ETNs Becoming Hybrid Closed-End Funds (USO, UNG, DBO, DXO, GAZ, GSG, GS, MS, GLD, SLV, JJC, FAS, FAZ)

Two months ago it was a carnal sin to suggest that certain exchange-traded funds or notes which track commodities would start trading more like a closed-end fund based upon supply and demand moves in shares caused by in-flows and out-flows of orders rather than solely by the direction of the prices of underlying commodities.  It has been our ongoing prediction that many commodity ETF/ETN products (and maybe some leveraged products as well) will become more like closed-end funds. Yet here under new regulations that have not even become gospel, we have seen new share issuances either denied or withdrawn from some of these ETF or ETN products.  And we are getting to see a premium in pricing to boot.  The United States Natural Gas Fund LP (NYSE: UNG) is the most classic example out there.  This ETN was at a 15% to 16% premium to the actual gas futures as investors are choosing to pay higher prices just for the ability to get exposure in the portfolio in case these prices rise.  The UNG has already confirmed that no new shares would be issued currently, and it is now so large that it controls closed to 20% of the benchmark natural gas contracts.  Limitations of this sort will drive a free-market theorist nuts, but the other reality is that this can also create large directional price moves that have nothing at all to do with fundamentals.

It turns out that the PowerShares DB Oil Fund (NYSE: DBO) traded about 0.3% higher than its actual value in crude futures late last week, and limits to shares could exaggerate premiums and discounts.  And the PowerShares DB Crude Oil Double Long Exchange-Trade Note (NYSE: DXO) has also suspended issuing new shares. Barclays has also said that it would, at least temporarily, suspend new shares from being issued in its natural gas ETN called the iPath Dow Jones-AIG Natural Gas Subindex Total Return Exchange-Traded Notes (NYSE: GAZ).

Barclays also said that it would stop issuing new shares of the iShares S&P GSCI Commodity Index Trust (NYSE: GSG) once the outstanding amount reached 55.9 million shares. If our data is accurate on the latest count, that looks to stand at roughly 52 million shares.  This is a semi-diversified product that tracks about 24 different commodities in energy, agriculture, industrial metals, prcious metals and livestock.  It is energy dominant, but this was a much more diversified fund that decided to limit its size.  This one also has traded at a premium to its underlying value.
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Posted on: August 24, 2009 – 11:30 am in Commodities, ETF, Metals, Oil & Gas, Regulation, , , , , , , , , , , , ,