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May 6/08
A) Oil at Record ( AGAIN)
( Contrary to the reversal forecast by The Gartman Letter - oil ain't ready to roll over)
Crude futures climbed to uncharted territory in New York Monday as concerns about supply disruptions in Nigeria and weakness in the U.S. dollar helped lift prices to nearly $120 a barrel at the close.
"Renewed supply and demand concerns have pushed the crude oil market to a new high," said Darin Newsom, DTN senior analyst. "After taking a short pause, the market seems back on track to reach its long-term price objective near $126."
Crude oil for June delivery closed at $119.97 a barrel on the New York Mercantile Exchange, up $3.65, or 3.1%, for the regular trading session. The contract climbed as high as $120.36 in electronic trading. The prices surpassed the record electronic intraday high of $119.93 set on April 28.
"Nigerian oil off the market and increasing tensions with Iran seem to be the flavor of the day," said Phil Flynn, a vice president at Alaron Trading.
Meanwhile, "the dollar is getting smoked," contributing to oil's rally Monday, said Flynn, in emailed comments.
On the currency markets, the dollar fell against most of its major counterparts. The dollar index, which tracks the performance of the greenback against a basket of other major currencies, was last down 0.4% to 73.19
Nigeria's rebel group Movement for the Emancipation of the Niger Delta, MEND, said Sunday it was responsible for an attack on a Shell oil flow station in the south of the country, according to media reports. Shell, a unit of confirmed the attack and said that some oil production had been closed down, according to reports.
National Futures Advisory Service Oil Forecast $ 125- 130 - 150
From here, traders are likely eyeing $125-$130 as the "next intermediate stop before we see $150," said John Person, president of National Futures Advisory Service. In an email, he points out that year to date, oil prices are up nearly 28% and "we are not in the midst of driving or hurricane season."
"This market is pretty scary right now because it really does have the power and momentum to trade to $130 and beyond within the next 90 days," he said. "Add a supply disruption, refinery outage or more strikes and we will easily be at $130."
Oilexco ( OIL) $15.42 down .11 ( .71%)
Antrim Energy $ 4.00 up .10 (2.56%)
see separate story re : drilling results
Bow Valley (BVX) $5.75 up .20 ( 3.60%)
B ) Natural Gas - rising with Oil
Natural gas in New York advanced amid increased demand as distributors secured supplies to put into storage in competition with industrial users.
Gas has gained 49 percent so far this year, climbing to a 28-month intraday high of $11.36 per million British thermal units on April 28 as supplies fell to the lowest since May 2004.
``The rally from the beginning of this year has been so strong and straight up'' that those that ``didn't get in place the coverage they need'' are buying now, said Carl Neill, an energy analyst at Risk Management Inc. in Chicago.
Natural gas for June delivery gained 38 cents, or 3.5 percent, to $11.157 per million British thermal units at 10:52 a.m. on the New York Mercantile Exchange. Gas rose as crude oil surged amid concern supplies may be disrupted.
``There's a lot of things to keep us buoyed. There's too much uncertainty with summer on the horizon to get a prolonged price break,'' said Neill. ``Crude oil is popping back up and that has widened the disparity with natural gas on a Btu basis.''
Birchcliff Energy ( BIR) $ 10.85 up .14 ( 1.31%)
Peyto Energy Trust ( Pey.un) $ 20.50 up .50 ( 2.50%)
Vero Energy ( VRO) $ 9.28 up .34 ( 3.80%)
following my own advice I have added to the Vero position Monday.
C) Power shortages World Wide - help curtail metals supply and support prices
Structural Challenge - Barclays Forecast
``Problems in South Africa and China with electrical capacity are not just bad luck, but result from a lack of investment,'' said Kevin Norrish, commodity research director at Barclays. ``Energy availability in the next 10 years is going to be a very important issue to the mining sector. We see these as structural changes, not cyclical changes.''
China built 549.3 billion Yuan ($79 billion) of generators and power lines last year, according to state officials.
Accelerating demand will tighten the nation's power supply again within two years, according to Citigroup, which estimates shortages there cut first-quarter copper output by 40,000 tons, zinc by 125,000 tons and aluminium by 600,000 tons.
``We're not going to solve these power shortages without new facilities,'' said Evy Hambro, who manages BlackRock Inc.'s $17 billion World Mining Fund in London.
Electricity Supplies Thin
Electricity supplies remain ``tight'' in more than half of China, the nation's top economic planner said last week, adding that warm weather may cut hydropower output this summer. Energy shortages in South Africa, the world's largest source of platinum, may last seven years, state-owned utility Eskom Holdings Ltd. forecasts. Rationing there looks likely until new power plants start up in 2012, Goldman Sachs JBWere Pty said.
``We've been through a period of 20 years when there hasn't been much built in terms of new capacity,'' said Tim Barker, who helps manage more than $54 billion of assets at BT Financial Group in Sydney. ``We're probably reaping the reward of that lack of foresight.''
Eskom is cutting electricity across cities and rationing power to industry including BHP Billiton Ltd. and Anglo Platinum, which mines a third of the world's supply of the metal. South Africa produces 10 percent of the world's gold and 78 percent of its platinum. Chile, the world's biggest copper producer, faces the risk of energy rationing after the worst drought in 50 years lowered hydropower reserves amid a shortage of natural gas for generators.
D) Copper Outlook - forecast from Barclays
Copper may have further to increase. In inflation-adjusted terms, the price hasn't yet reached a record, according to Barclays. In real terms, the metal is trading close to levels last seen a century ago, when the U.S. economy was expanding and the nation was being wired for electricity.
China, which is making a similar transformation, is building power stations and transmission lines that are exacerbating deficits in metals supply. As much as 80 percent of China's grid investment is spent on copper, said Yuan Genfa, secretary general of the Shanghai Electric Wire & Cable Industry Association.
``Over 50 percent of China's copper use is electrical use,'' said Na Liu, director of Institutional Equity at Scotia Capital Inc. ``The electricity grid, for the most part, is copper wire.''
Chile may be forced to limit power use for the first time since 1999 because drought reduced water levels at hydroelectric reservoirs, said Mauricio Canas, an analyst at research company Penta Estrategia & Inversiones in Santiago.
Teck Cominco ( TCK.B) $ 46.70 up $2.30 ( 5.18%)
Hudbay ( HBM) ( HBM) $20.18 up .22 ( 1.10 %)
E ) The ( Vancouver / May ) AMP Seminar
Planning Not Wishing for Success
Seminar Registration - please print out the Application Form in the right hand margin
( or for seminar materials ONLY )
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What is Your Plan for 2008 ?
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F) Sprott Resource Corp.
SCP $ 3.23 up .27 ( 9.12%)
to form strategic alliance with Lara Exploration Ltd.
here is the news release :
TORONTO, May 5 - (TSX:SCP) - Sprott Resource Corp. ("SRC") announced today that it has signed a letter of intent ("LOI") with Lara Exploration Ltd. ("Lara") to form a strategic alliance targeting phosphates, potash and other fertilizer feedstock minerals outside of Canada. The strategic alliance, which will be owned equally by SRC and Lara, aims to build on the relationship that Lara and SRC developed with the Mantaro Phoshpate Project.
"We are excited to be working again with Lara and Miles Thompson, a successful prospect generator," said Kevin Bambrough, President and CEO of SRC. "Miles and the Lara team bring considerable expertise and experience in a number of key regions of the world. We hope that with capital support, the Lara team will be able to generate exciting opportunities."
Under the terms of the LOI, SRC will initially seed the strategic alliance with up to $3,000,000, of which $500,000 will be committed in the first year. Lara will act as operator to seek acquisitions and undertake basic exploration.
G ) Antrim Energy
AEN $ 4.00 up .10 ( 2.56%)
News Release helps - a little.
The stock fell initially as investors thought the news was a dry hole - NOT SO>
here is part of the release:
Full analysis of the log and test datafrom 21/28a-9y has led to an upward revision of the net oil paythickness from the previously reported 52 feet of true vertical depth(TVD) net oil pay and 35 feet of net gas pay to 65 feet of net oil pay and 30 feet of net gas pay. As designed, the well was drilled at a60-degree angle resulting in wellbore measured thicknesses of 120 feetof net oil pay and 47 feet of net gas pay.
The reservoirinformation collected from this operation will be supplied to independent engineering evaluator McDaniel & Associates to producing updated reserve report on the field.
Antrim expects to accelerate the Fyne appraisal and development using the contracted Transocean prospect which is scheduled to begin a multiwell drilling program for Antrim in June this year.
Two additional wells are planned on the field before the company submits an application to the United Kingdom regulatory authorities for development approval. Assuming approval is granted, no further wells are anticipated on the field and first production is targeted for as early as 2010.
H) ZCL Composites
ZCL $9.75 up .31 ( 3.28%)
Note : Release of earnings tomorrow ( TUESDAY) morning.
I ) Thompson Creek
TCM ( 22.75 up .72 ( 3.31%)
Note : earnings release after the market close Thursday.
J) Timminco
( TIM) $19.20 down .68 ( 3.42%)
The AMP sold its position over the last two weeks.:
a) to hold onto our profits
b) because as small retail investors we cannot determine when or if this pr match between the Company and its supporters vs short sellers will be resolved. in the meantime our cash went into Hudbay and Natural Gas.
The PR battle is in the financial pages as the media now turns on a market darling and sees Bre- X under every rock.
The barrage of negative stories keeps small investors selling and away.
When elephants battle only the grass gets crushed .
K ) GOLD
(MarketWatch) -- Gold futures closed more than $16 an ounce higher Monday to mark two winning sessions in a row, as crude-oil prices climbed to a fresh record.
Gold for June delivery closed at $874.10 an ounce on the New York Mercantile Exchange, up $16.10, or 1.9%. It climbed as high as $874.70 during the trading session.
"I'd watch for dollar and energies to continue to direct moves in gold," said Zachary Oxman, a senior trader at Wisdom Financial, in emailed comments.
June crude rose past $120 a barrel in New York to touch a new record, propelled by oil supply disruptions in Nigeria.
And on the currency markets, the U.S. dollar weakened even after a report from the Institute for Supply Management showed that nonmanufacturing sectors of the U.S. economy expanded during April after three months of contraction.
The ISM nonmanufacturing index rose to 52.0% from 49.6% in March. The increase was unexpected. Economists were looking the index to inch lower
For gold, Monday's recovery is "ultimately attributable to some bargain hunting offtake ahead of India's May 7 auspicious date, but more so to the ... rise in crude oil on the heels of Nigerian- and Iranian-driven apprehensions," said Jon Nadler, a senior analyst at Kitco.com, in emailed comments.
May 7 marks the day of the Akshaya Tritiya Festival in India, the Golden Day of Eternal Success, according to Nadler, who noted that it's "probably South India's biggest gold-buying festival of the year."
"Let's see what appetite they exhibit for gold near $870 as opposed to $900 or $1,000-plus," he said.
Yamana ( YRI) $13.56 up .48 (3.67%)
Western Goldfields ( WGI) $1.95 up .05 ( 1.72%)
Centamin ( CEE) $1.32 down .01
Osiko ( OSK) $4.20 down .01
L ) Sask . News Flash
NEWS FLASH! - Saskatchewan's worst air disaster occurred when a small two-seater Cessna 150 plane, piloted by two University of Saskatchewan students, crashed into a cemetery earlier today. Search and Rescue workers have recovered 300 bodies so far.
The Saskatchewan RCMP pulled over a pickup on Highway 16.
The RCMP officer asked, 'Got any ID?'
The driver replied, 'Bout whut?
Final Words
The behaviour of the market is unpredictable, but the behaviour of the market's participants is about as predictable as you can get. For long-term success, investors need the discipline to do two things:
1. Invest during points of pessimism
2. Exercise patience.
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