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2 Jul 7 2011 @ 10:55am by Matt Smith in Crude Oil, Global Energy, Natural Gas, risk management

If Commodities Were Members of The Rolling Stones…

Commodityworld™ is very much like The Rolling Stones, full of energy and gathering no moss. Seeing a recent picture of the Stones got me wondering about which commodity best represented each of them (welcome to my world…). Keith was easy to choose, but as for Mick I couldn’t get no satisfaction, well, you’ll see…here’s the wrinkled rockers with their commodity equivalents.  

First up is Keith Richards, representing EU trading emissions. One look at the chart, and you will see this carbon commodity has shown reckless abandon – like our guitar-wielding wildman of rock – and has fallen out of its own coconut tree:  

EU Carbon Permits, 2011 - 2013 (ascending order)

 

The reason for this tumble is well represented by Keith Richards here; it was all about excess. The EU is ready to release permits for phase three of the emissions trading scheme, which starts in 2013. However, concerns surrounding oversupply have sent the market plummeting back to levels not seen since early 2009.  

Next up, front man Sir Mick Jagger represents charismatic crude. This stadium rocker of a commodity dominates the limelight in commodityworld™ with its presence on the global stage. And just like Jagger, crude is never far from the headlines. 

Controversy has ramped up recently as the IEA decided to release 60 million barrels of emergency reserves due to apparent concerns of higher oil demand later this year, and covering the supply shortfall left by Libya. 

This decision appears to have undermined Opec, as Saudi Arabia was already increasing production to 10 mb/d to alleviate supply worries. Two weeks on, and crude – the front man of commodityworld™ – is back strutting its stuff above pre-IEA announcement levels. As WTI eyes a break back into triple digits, the decision by the IEA is ever more scrutinized. 

Ronnie Wood, despite having a volatile side, is calm and composed with an axe in his hand (a guitar, that is). US natural gas is also prone to such bouts of volatility. However, despite this choppiness it remains riffing around the 40-week moving average (purple line on chart), while the three previous prompt month expiries (May – Jul) have remarkably all been within a nickel of each other – strange serenity for natty:  

US natural gas prompt month, March 2009 - present

 

Finally, but actually most importantly, drummer Charlie Watts. Charlie represents coal, because despite appearances, it remains one of the key underlying forces behind everything. Despite all the focus on renewable fuels and reducing emissions, coal consumption in the US will exhibit annual growth of 0.8% from 2009 to 2035, outpacing that of natural gas (0.6%). Keith Richards has gone as far as to say that the Rolling Stones would not be, or could not continue, as the Rolling Stones without Watts. Given the global demand growth shown below in ExxonMobil’s Outlook to 2030, there would appear a similar reliance on coal by commodityworld™:  

  

Thanks for playing once again; next week we’ll take a look at synthetic fuels through Milli Vanilli. Until then…adios!

2 Comments on this post:

  1. Daniel says:

    I would say that CO2 is actually Bill Wyman, ex-Stones bass player: gone, retired and forgotten, and Keith Richards is more like WTI, de-rating despite strong demand. Great post!!!

  2. Matt Smith says:

    There were a few Bill Wyman references I thought best left alone, so I avoided him completely! Thanks, Daniel!

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