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Energy prices are up while base metals are lower following the much-anticipated speech from Federal Reserve Chairman Ben Bernanke. How and when the Fed will act remains in question, but the odds of action appear to have increased.
Energy prices are ending the week higher following Federal Reserve Chairman Ben Bernanke’s suggestion that the central bank is prepared to take steps to kickstart the economy. Base metals, however, remained sluggish due to longer-term global growth concerns and the central banker’s confirmation of looming downside risks.
At the annual economic policy forum Friday, Bernanke stated that “it is important to achieve further progress” in US growth prospects, “particularly in the labor market.” For market players, Bernanke hinting at possible further quantitative easing was especially welcome, as he said that “the costs of nontraditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant.”
Still, there was no clear indication of what kind of steps the Fed will take — or when it will take them. The next regularly scheduled Federal Reserve policy meeting is on September 13. Meanwhile, concerns about Europe continue to bog down market sentiment, even though Chinese Premier Wen Jiabao stated, following his bilateral meeting with German Chancellor Angela Merkel, that Beijing is prepared to continue to shore up European government bonds in order to ensure the Eurozone’s path to recovery.
In morning trade Friday, Brent crude is up 0.9 percent at $113.61 a barrel, while copper is down 0.3 percent at $3.43 a pound. Gold is up 0.7 percent at $1,668.20 an ounce.
Oil and gas
Politics are driving the debate about whether or not to open up US strategic petroleum reserves as prices at the pumps climb before the presidential election. Hurricane Isaac, which hit the Gulf of Mexico region this week, has forced oil and gas producers to shut down production in the region, driving up energy prices across the United States. The Bureau of Safety and Environmental Enforcement reported that about 93 percent of oil production and 67 percent of natural gas production has been shut in, meaning that underwater pipes have been closed off to prevent spills. Meanwhile, 505 out of 596 manned oil platforms and 50 out of 76 oil rigs have been evacuated.
Having been responsible for the worst oil spill disaster to date in the region, BP (LSE:BP) said it will donate $1 million to support the Gulf of Mexico’s relief efforts following Hurricane Isaac. The money will support the operations of the American Red Cross and Salvation Army in Louisiana and Mississippi.
Russia’s Rosneft and Norway’s Statoil (NYSE:STO) agreed to four joint ventures in the Okhotsk and Barents seas to develop undersea reserves. Rosneft will hold a 66.67 percent stake in the ventures, while Statoil will have shares in the remaining 33.33 percent. Statoil will fund all of the costs in the exploration phase, which includes an obligatory work program of six wells that are to be drilled between 2016 and 2021.
In Argentina, YPF (NYSE:YPF) said that it has discovered a new reserve of shale gas and oil in the provinces of Chubut and Santa Cruz. CEO Miguel Galuccio said that details of the discovery will be revealed after he concludes presenting the company’s growth strategy plans to major US energy companies in September.
Brazil’s Petrobras (NYSE:PBR) awarded Canada’s Wavefront Technology Solutions (OTCQX:WFTSF,TSXV:WEE) a 12-month contract worth $1.25 million to help improve production through its fluid injection optimization technology at the Riachuelo oil field.
Copper
Canada’s Hudbay Minerals (NYSE:HBM,TSX:HBM) held a groundbreaking ceremony to develop the Constancia copper mine in Southern Peru. The $1.5 billion mine is expected to begin production in 2014, and full production is anticipated for the second quarter of 2015. The mine should produce 125,000 tonnes a year for four years.
About 140 staff members at BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) will be transferred or laid off as the Australian mining giant postpones developing its Olympic Dam copper project. There are currently 190 people on the team, most of whom are based in Adelaide.
Red Metal Resources (OTCQB:RMES) acquired four additional mining claims next to its Farellon project in Northern Chile. Results from the company’s recent mapping program on the claims are expected to be released soon.
Gold
Harmony Gold Mining (NYSE:HMY) said the Wafi-Golpu reserve in Papua New Guinea, which it co-owns with Newcrest Mining (ASX:NCM,TSX:NM) could potentially produce 490,000 ounces of gold as well as 290,000 metric tons of copper a year. The site contains about 12.4 million ounces of gold and 5.4 million tons of copper. Initial production is slated for 2019 at a cost of $4.85 billion.
The government of Tanzania said it will require Barrick Gold (NYSE:ABX,TSX:ABX) to pay a 20 percent tax on capital gains from its potential sale of African Barrick Gold (LSE:ABG) to China National Gold Group. Barrick Gold is currently discussing the possibility of China National Gold acquiring its nearly 74 percent stake in African Barrick.
Vancouver-based Intigold Mines (OTCQX:IDMNF,TSXV:IGD) began trading on the OTC market on Friday. The company recently acquired a 51 percent stake in TTAGIT Social Networks, a comprehensive social network management system.
Securities Disclosure: I, Shihoko Goto, hold no direct investment interest in any company mentioned in this article.
