Oil Drops Most in Eight Weeks as Price Falls $3 in Minute

By Moming Zhou and Margot Habiby - Sep 18, 2012 4:18 AM GMT+0700 Oil declined more than $3 in less than a minute as October options were about to expire, ending the day with the largest drop in eight weeks.
Futures tumbled to $94.83 at 1:54 p.m. from $97.88 in the same minute on a surge in volume. The price slipped earlier after the Federal Reserve Bank of New York’s general economic index, known as the Empire State Index, reached a three-year low, indicating possible weakness in demand.

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Oil declined more than $3 in less than a minute in late trading as October options were about to expire, ending the day with the largest drop in eight weeks. Photographer: Plamen Petkov/Bloomberg

“Today it’s the price making the news, not the news making the price,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “In the larger scheme of things, I would go with the idea that this is profit-taking run amok.”
Oil for October delivery fell $2.38, or 2.4 percent, to settle at $96.62 a barrel on the New York Mercantile Exchange. Prices are down 2.2 percent this year. The decline was the largest since July 23. Prices traded above $98 before the slump that started shortly after 1:50 p.m.
Crude options for the October futures expired today. The futures expire on Sept. 20.
Brent for November settlement fell $2.87, or 2.5 percent, to $113.79 a barrel on the London-based ICE Futures Europe exchange.
The most active October options in electronic trading on the Nymex were the $98 puts, which gained $1 to $1.38 a barrel with 2,920 lots trading.

Volume Surge

Trading volume stayed below 300,000 before picking up after 1:50 p.m. and rising to 633,000 at 3:44 p.m. The low early volume, due to the Jewish New Year holiday Rosh Hashana, contributed to the drop, said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. The three-month average volume is 536,000.
“Transactions in a low volume just sort of set this up,” he said. Speculation that the U.S. government would release oil from Strategic Petroleum Reserve also boosted prices, he said.
Jay Carney, the White House spokesman, said in e-mailed comments that there is “no change” in oil reserve releases. He said on Aug. 30 that the Obama administration is continuing to look at all its options to make sure high oil prices don’t crimp the global economy.
“I think it’s a combination of options expiration and Rosh Hashana,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “My guess is that someone had an order they had to fill before options expired and there’s light volume because of the holiday.”

CME Group

CME Group Inc., owner of the Nymex, said it did not suffer any technical issues as oil, gasoline and heating oil dropped on the exchange, said Chris Grams, a spokesman for CME. Gasoline and heating oil declined more than 2 percent.
The U.S. Commodity Futures Trading Commission in Washington will look into the decline and trading surge.
“When price and volume move so fast and so dramatically, it raises our antennas immediately,” Commissioner Bart Chilton said. “We need to get a quick visual on what happened and why. In this sort of circumstance, I always want to know what the cheetah traders -- the high-frequency traders -- were doing.”
Commissioner Scott O’Malia said the CFTC is contacting CME and IntercontinentalExchange Inc. to learn more.
Oil fell in trading before the late decline as manufacturing in the New York region contracted more than forecast in September and as the dollar gained against the euro.
The Federal Reserve Bank of New York’s general economic index, known as the Empire State Index, tumbled to minus 10.41, the lowest level since April 2009. Readings less than zero signal contraction. The index covers New York, northern New Jersey and southern Connecticut.

‘Geopolitical Risk’

“The underlying economy has yet to be helped by all this economic stimulus,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “We’re probably going to need a new catalyst or else we’re probably going to consolidate for several days. There’s enough geopolitical risk to keep the market from breaking down.”
The euro fell as much as 0.4 percent to $1.3084 after finance chiefs deadlocked at euro-area debt-crisis talks. A stronger dollar reduces oil’s appeal as an investment alternative. Oil advanced as much as 0.5 percent in intraday trading on concern that protests in the Middle East would lead to supply disruptions.
“Today’s price action appeared to highlight an unusually nervous market environment in which the oil complex has become heavily reliant upon intangible forces such as economic stimulus measures and Middle East tensions for sustainable price strength,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois-based consulting company, in a note to clients.
To contact the reporters on this story: Moming Zhou in New York at mzhou29@bloomberg.net; Margot Habiby in Dallas at mhabiby@bloomberg.net
To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net

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Patriot Coal Files for Bankruptcy Protection in New York

By Tiffany Kary and Dawn McCarty - Jul 10, 2012 5:03 AM GMT+0700

Patriot Coal Corp. (PCX) filed for bankruptcy after milder winters and a shift to natural gas sent coal demand to a 24-year low.

The company’s Chapter 11 petition listed $3.57 billion in assets and $3.07 billion in debts. The filing in U.S. Bankruptcy Court in Manhattan said dozens of the company’s units would join in the filing.

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July 9 (Bloomberg) -- Carol Massar reports Patriot Coal Corp. has filed for bankruptcy after milder winters and a shift to natural gas has sent coal demand to a 24-year low. She speaks on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

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U.S. coal use in the first quarter was the lowest for that period since 1988, according to the Energy Information Administration. Photographer: Gary Gardiner/Bloomberg

“The coal industry is undergoing a major transformation and Patriot’s existing capital structure prevents it from making the necessary adjustments to achieve long-term success,” Patriot Chief Executive Officer Irl F. Engelhardt said in a statement that cited lower thermal coal prices, canceled customer contracts and rising costs for environmental liabilities for increasing pressure on the company in recent months.

Patriot already has a loan to finance operations in bankruptcy and expects its mining operations and customer shipments to continue through the case, the company said in its statement. The $802 million loan, which still requires court approval, is through Citigroup Global Markets Inc., Barclays Bank Plc, and Merrill Lynch, Pierce, Fenner & Smith Incorporated as joint lead arrangers.

Pay, Benefits

The company will also seek court approval to pay employees and continue health care and other benefits, according to the statement.

Patriot has 13 active mining complexes in Appalachia and the Illinois Basin and controls an estimated 1.9 billion tons of coal reserves, according to its website. It sells thermal coal to electricity generators and metallurgical coal to steel and coke producers.

Wilmington Trust Company, and U.S. Bank National Association were among Patriot’s largest unsecured creditors, according to court papers. The filing listed BlackRock Inc., State Street Corporation and The Vanguard Group Inc. as entities that control 5 percent or more of the voting stock in the company.

Shares closed at 61 cents after falling from an intraday high of $2.09 today in New York Stock Exchange composite trading. They tumbled 73 percent this year through July 5.

The company’s $250 million in 8.25 percent notes due 2018 traded at 34 cents on the dollar as of 5:17 EST today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Its $200 million in 3.25 percent notes due 2013 last traded at 26 cents on the dollar at 5:20 EST today.

Coal Use

U.S. coal use in the first quarter was the lowest for that period since 1988, according to the Energy Information Administration. Utilities have switched some power plants to cheaper natural gas as regulations restricting emissions make coal costlier to burn. Gas fell to a decade low in April amid a surplus of the fuel.

This year, Patriot has reduced thermal coal production by more than 4 million tons, trimmed costs and laid off 1,000 employees or contractors, according to a May 9 filing with the U.S. Securities and Exchange Commission.

Patriot has worked to refinance debt since at least May, when it said it hired Blackstone Group LP while meeting with lenders to complete loan and credit facilities. Also that month, Engelhardt took over as Patriot’s chief executive officer after Richard M. Whiting resigned.

Forecast Cut

The company postponed closing a $625 million, 9.5 percent five-year loan after saying May 14 that a key customer might default on a contract for coal that had fallen as much as $30 a ton below the original contracted price. The same day, the company cut a 2012 forecast for sales of steelmaking coal.

On June 1, Patriot filed a complaint in federal court in Charleston, West Virginia, alleging that Fort Meyers, Florida- based Keystone Industries LLC breached a contract to buy “hundreds of thousands of tons” of coal. Later that month, Principal Accounting Officer Christopher Knibb resigned and was replaced by Chief Financial Officer Mark Schroeder, according to filings with the SEC.

Patriot got 87 percent of its 2011 revenue from coal mined in the Central Appalachian region of the U.S., which includes Kentucky and West Virginia. Its operating costs in Appalachia were $71.06 a ton last year while the average price of Central Appalachian coal futures was $75.86.

The bankruptcy case is In re Patriot Coal Corp.; 12-bk- 12900; U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Tiffany Kary in New York at tkary@bloomberg.net; Dawn McCarty in Wilmington, Delaware at dmccarty@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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Patriot Said to Get Funding Ahead of Possible Bankruptcy

By Beth Jinks, Krista Giovacco and Jeffrey McCracken - Jul 10, 2012 4:04 AM GMT+0700

Patriot Coal Corp. (PCX), the U.S. fuel producer that has lost more than $7 billion in value, has lined up financing ahead of a bankruptcy filing that may come as soon as today, said two people with knowledge of the matter.

The so-called debtor-in-possession financing is being provided by Citigroup Inc., Barclays Plc and Bank of America Corp., said the people, who asked not to be identified as the process is private.

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Patriot mining operations. Photographer: Douglas Graham/Roll Call via Getty Images

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U.S. coal use in the first quarter was the lowest for that period since 1988, according to the Energy Information Administration. Photographer: Gary Gardiner/Bloomberg

Patriot is the biggest casualty so far of the slump in the U.S. coal industry, which has seen tens of millions of tons of production cutbacks this year. Patriot, which owns mines in Kentucky and West Virginia, this year idled some of its mines, reduced a 2012 forecast for sales of steelmaking coal, and warned of a potential default by a key customer.

Coal miners are struggling because of a combination of a warm winter, utilities switching some generating capacity to cheaper natural gas and regulatory moves to curb emissions from coal-burning power plants. U.S. coal use in the first quarter was the lowest for that period since 1988, according to the Energy Information Administration.

The miner’s shares fell 72 percent to 61 cents by 4:15 p.m. New York time. Spun off five years ago by Peabody Energy Corp. (BTU), Patriot has tumbled 93 percent this year. The company’s market value peaked at $7.5 billion in 2008.

Patriot’s $250 million of 8.25 percent notes due in April 2018 dropped 7.9 cents to 34.1 cents on the dollar as of 4:57 p.m., according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The bonds are yielding 36 percent, Trace data show.

Working on Loans

Patriot, Citigroup, Barclays and Bank of America didn’t immediately return phone calls seeking comment.

The St. Louis-based company said in May it hired Blackstone Group LP as it worked with lenders to arrange $625 million of loans and credit facilities to refinance other debt. A commitment letter from Citigroup, Barclays and Natixis expired July 6.

Chairman Irl Engelhardt took over as Patriot’s chief executive officer on May 29 after Richard M. Whiting resigned.

Patriot last month sued Keystone Industries LLC over claims it broke a purchase contract for “hundreds of thousands of tons” of coal.

To contact the reporters on this story: Beth Jinks in New York at bjinks1@bloomberg.net; Krista Giovacco in New York at kgiovacco1@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net; Jeffrey McCracken at jmccracken3@bloomberg.net; Faris Khan at fkhan33@bloomberg.net

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Oil Rises on Stimulus Speculation, Iranian Supply

By Moming Zhou - Jul 4, 2012 3:45 AM GMT+0700

Oil surged to a one-month high on speculation that central banks from Europe to China will ease monetary policy to spur growth while sanctions against Iran may curb supply.

Prices gained 4.7 percent as the European Central Bank is forecast to cut interest rates this week. A state-owned newspaper in China said the time is right to increase liquidity in the banking sector. Iran fired several missiles during a three-day military exercise as the country threatened to block tanker traffic in the Strait of Hormuz.

“What you are seeing in the market right now is greater risk appetite as anticipations of further monetary easing grow,” said Harry Tchilinguirian, BNP Paribas SA’s London-based head of commodity markets strategy. “The market’s focus is returning back to Iran and the implications of the Iranian embargo in terms of the volume of oil that needs to be replaced.”

Oil for August delivery climbed $3.91 to settle at $87.66 a barrel on the New York Mercantile Exchange, the highest level since May 30. Futures have increased 13 percent since closing at an eight-month low of $77.69 a barrel on June 28. They are 11 percent lower this year.

Prices were little changed after the American Petroleum Institute reported oil inventories fell 3.03 million barrels last week to 382.6 million. The August contract gained 4.6 percent to $87.63 a barrel at 4:45 p.m. in electronic trading on the Nymex. Futures were at $87.57 before the report was released at 4:30 p.m. in Washington.

Closed Tomorrow

The Nymex trading floor will be closed tomorrow for the U.S. Independence Day holiday.

Brent for August settlement gained $3.34, or 3.4 percent, to $100.68 on the London-based ICE Futures Europe exchange, settling above $100 for the first time since June 6.

The European Central Bank and the Bank of England will announce interest-rate decisions on July 5. ECB officials will lower their benchmark rate by 25 basis points to a record low 0.75 percent, according economists surveyed by Bloomberg.

The People’s Bank of China may cut lenders’ reserve requirements to increase liquidity in the banking system, according to a commentary on the front page of today’s China Securities Journal, which is published by the official Xinhua News Agency. The central bank announced a cut to interest rates on June 7, a day after the newspaper published a commentary urging the move.

Chinese Stimulus

“There is a better chance that Europe and China are going to have some monetary stimulus plans and that’s helping oil,” said Phil Streible, a Chicago-based commodities broker at RJO Futures. “If Iran does cut tanker traffic, oil prices will have a big advance. You are seeing some risk-on sentiment.”

A European Union embargo on Iranian oil took full effect on July 1 after exemptions on some contracts and insurance ended. Iran’s crude exports may drop to about 1 million barrels a day, Goldman Sachs said in a report yesterday. The country pumped 3.16 million barrels a day in June, the second biggest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, according to Bloomberg estimates.

“You’ve got saber-rattling by Iran that’s fueling the oil market,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “Did we really think that Iran would go away quietly?”

Iran Sanctions

Iran’s parliament is working on a bill to close the Strait of Hormuz to oil tankers linked to countries applying new EU sanctions, a lawmaker from the national security committee told Jam-e-Jam newspaper yesterday. The waterway is a transit route for a fifth of the world’s crude.

Iran’s Revolutionary Guard Corps “successfully” fired several missiles, including long-range ones, in a military exercise that began yesterday, the official Islamic Republic News Agency said in a report published today.

Oil also increased on expectations that stockpiles decreased last week. Inventories probably dropped 2.3 million barrels last week, according to the median of nine analyst estimates in a Bloomberg survey before a July 5 Energy Department report.

Gasoline supplies increased 1 million barrels last week, according to the survey. Refineries traditionally step up operations with the start of the so-called summer driving season, which runs from Memorial Day at the end of May to Labor Day in early September.

Factory Orders

Prices followed gains in stocks after the Commerce Department reported orders placed with U.S. factories rose in May for the first time in three months, easing concern that manufacturing is faltering.

The 0.7 percent increase in bookings followed a revised 0.7 percent drop in the prior month. The median forecast of economists in a Bloomberg survey called for a rise of 0.1 percent.

Electronic trading volume on the Nymex was 602,651 contracts as of 4:45 p.m. in New York. Volume totaled 542,783 contracts yesterday, 3.9 percent below the three-month average. Open interest was 1.42 million.

To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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Iran-Oil Sanctions Risk Biggest OPEC Export Loss Since Libya

By Ewa Krukowska - Jul 2, 2012 2:31 AM GMT+0700

European Union sanctions on Iran entered into full force yesterday after exemptions on some contracts and insurance ended, boosting crude prices and pressure on the Persian Gulf nation to halt its nuclear- enrichment program.

The reduction in Iranian exports may become the biggest supply disruption from a member of the Organization of Petroleum Exporting Countries since an armed rebellion all but halted pumping in Libya last year, according to the International Energy Agency. It also comes as a strike by Norwegian workers is curbing flows from North Sea fields.

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A petrol station in central Tehran. Iran, the second-biggest producer in OPEC after Saudi Arabia, was producing about 3.3 million barrels a day in May. Full implementation of sanctions will remove about 1 million barrels a day during the second half of the year as buyers disappear and Iranian storage tanks become full, the Paris-based IEA forecast in a June 13 report. Photographer: Behrouz Mehri/AFP/Getty Images

“We expect Brent oil prices to be supported by Iranian oil sanctions and potential loss of supplies from the North Sea,” Gordon Kwan, the head of regional energy research at Mirae Asset Securities based in Hong Kong, said in a June 28 report. “The imminent EU insurance ban on tankers carrying Iranian crude could drive up demand for Brent and Dubai crude.”

Brent futures fell below $90 a barrel on June 21 for the first time in 18 months as concern that Europe’s debt crisis would spread sapped the outlook for fuel use worldwide. Now, the Iran embargo and Norwegian strike are stoking speculation about a rebound in prices, according to analysts such as Kwan and Ole Hansen at Saxo Bank A/S. Brent for August settlement surged 7 percent on June 29 to close at $97.80 a barrel on the ICE Futures Europe exchange.

Unsold Barrels

Iran, the second-biggest producer in OPEC after Saudi Arabia, was producing about 3.3 million barrels a day in May. Full implementation of sanctions will remove about 1 million barrels a day during the second half of the year as buyers disappear and Iranian storage tanks become full, the Paris-based IEA forecast in a June 13 report.

Mohammad Ali Khatibi, Iran’s governor to OPEC, warned yesterday that the EU would bear “the consequences of politicizing the market,” without specifying what he meant, the state-run Iranian Students News Agency reported.

Mahmoud Bahmani, Iran’s central bank governor, said his nation “isn’t sitting by idly” and has a “very suitable” $150 billion in foreign currency reserves to help weather the latest trade and financial curbs. “We have programs to fight the sanctions, and we will confront hostile policies,” Bahmani said yesterday, according to the state-run Mehr news agency.

Emergency Meeting

Iran urged OPEC to call an emergency meeting to address the group’s production in excess of its targeted 30 million barrels a day, Mehr reported June 30, citing Oil Minister Rostam Qasemi. Disregard of the limit by some OPEC members “will negatively impact oil prices in the international market,” Qasemi said. The 12-member organization, which decided on June 14 to retain its daily ceiling of 30 million barrels, pumped about 1.6 million barrels more than that in May, according to data compiled by Bloomberg.

The EU agreed in January to ban oil imports from Iran, offering a five-month phase-in period for existing contracts to let member states such as Greece find alternative supplies. An exemption on tanker insurance restrictions for the worldwide shipping industry also ran out today.

Foreign ministers from the 27-nation bloc decided on June 25 the exemptions shouldn’t be extended after talks between Iran and the world’s powers about the nuclear program failed to reach a breakthrough since they started in April. Iran denies that it is developing nuclear weapons.

‘Toughest Measures’

“These are the toughest measures the EU has adopted against Iran to date,” U.K. Foreign Secretary William Hague said yesterday in a statement. “It is in the power of the Iranian leadership to end Iran’s current isolation, but unless they change course, the pressure will only increase.”

The EU ban on insurance for ships carrying Iranian oil affects 95 percent of the world’s tankers because they’re covered by the 13 members of the London-based International Group of P&I Clubs, which is adhering to the EU rule.

In an effort to retain an important Asian customer, Iran offered to supply oil to South Korea using its own tankers, a government official in Seoul said June 29, asking not to be identified because the matter is confidential.

Complementing the European sanctions, a U.S. law enacted Dec. 31 cuts off international banks from the U.S. financial system if they settle oil trades with Iran. The U.S. rule gave importing nations, including China, India and Japan, until June 28 to demonstrate they had “significantly reduced” their purchases of Iranian oil in order to qualify for exemptions.

Crude Dependence

Oil and its derivatives account for nearly 80 percent of Iran’s exports and about half of government revenue, according to the U.S. Energy Information Administration, which estimates the country’s 2010 net oil export revenues at $73 billion.

Iran’s oil exports may “gradually” decline by 20 percent to 30 percent after sanctions start and amid field maintenance work, Deputy Oil Minister Ahmad Qalebani said on June 26.

Such acknowledgement hasn’t erased tensions over the sanctions. Iran warned it can strike any target in the Strait of Hormuz and the Gulf and will soon equip ships with missiles capable of firing more than 300 kilometers (186 miles), Mehr reported June 29, citing a commander of the Islamic Revolutionary Guards Corps. Tankers carrying about a fifth of globally traded oil exit the Gulf though the Hormuz chokepoint.

Iranian ‘Playground’

“The Strait of Hormuz and the Persian Gulf is Iran’s playground and no one else’s,” Mehr cited Admiral Ali Fadavi as saying. “Any issues related to the Strait of Hormuz will be a very big story that will have consequences on the price of oil.”

A survey of 42 analysts on June 28 showed that 16, or 38 percent of them, predicted crude futures will increase in the week starting today, citing the new sanctions. Among the remainder, 12 forecast little change in prices and 14 expected a decline.

“That is the wildcard, the Iranian situation,” Torbjoern Kjus, an oil analyst at Oslo-based bank DnB ASA, said by phone on June 29.

“Nobody can be totally certain how it’s really going to affect the market,” he said. “There’s probably been huge inventory builds in Iran, and this could pose a bearish effect for next year or the second half of this year if there is a resolution.”

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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Hedge Funds Win on Bull Bets Before Biggest Rally: Commodities

By Tony C. Dreibus and Joe Richter - Jul 2, 2012 3:00 AM GMT+0700

Hedge funds lifted their bullish commodity bets for a third week, just before a European agreement to contain the region’s debt crisis spurred the biggest rally in raw-material prices in three years.

Money managers increased their combined net-long positions across 18 U.S. futures and options by 15 percent to 724,783 contracts in the week ended June 26, Commodity Futures Trading Commission data show. That’s the biggest gain since January. Corn holdings rose to the most in five weeks, and sugar wagers climbed to the highest since mid-April.

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Most markets surged June 29 after European leaders agreed to a 120 billion-euro ($152 billion) plan to stimulate growth and ease terms for loans to Spanish banks. The Standard & Poor’s GSCI Spot Index of 24 commodities jumped 5.6 percent, the biggest gain since April 2009, the euro climbed the most this year and Spanish bonds rallied. Europe consumes 18 percent of the world’s copper and accounts for 22 percent of oil demand, data from Barclays Plc and BP Plc show.

Policy makers “are addressing a lot of issues that were taboo,” said Mihir Worah, who manages Pacific Investment Management Co.’s $22 billion Commodity Real Return Strategy Fund from Newport Beach, California. “Whether this plan works or not, the fact that they’re talking about them is important. Stable or growing economies support more commodity demand.”

Equities Rally

The S&P GSCI index rose 6.3 percent last week. The MSCI All-Country World Index of equities gained 2.5 percent and the U.S. Dollar Index, a measure against six trading partners, retreated 0.8 percent. Treasuries returned 0.1 percent, a Bank of America Corp. index shows.

Leaders from the 17-nation euro zone ended talks last week by dropping the requirement that governments get preferred- creditor status on crisis loans to Spain’s banks and opened the door to recapitalizing lenders directly with bailout funds once Europe sets up a single banking supervisor. Until now, they had to get aid through their governments. Germany’s parliament approved the creation of a permanent bailout fund June 29.

Orders for U.S. durable goods climbed more than forecast in May, easing concern that U.S. manufacturing is faltering. Bookings rose 1.1 percent, the first gain in three months, the Commerce Department said June 27. Business activity expanded in June at a faster pace than expected, a gauge from the Institute for Supply Management-Chicago Inc. showed June 29.

Economic Confidence

The rally in commodities may not last because “the cloud of Europe is still going to hang over the market for several quarters,” said Jack Ablin, the chief investment officer of BMO Harris Private Bank in Chicago, which oversees about $60 billion of assets. Economic confidence in the euro area slumped to the lowest in more than 2 1/2 years in June and German unemployment increased more than economists forecast, separate reports showed June 28. Spain and Cyprus became the fourth a fifth euro members to seek external aid last month.

The S&P GSCI slumped 13 percent last quarter, the most since the global recession, and tumbled into a bear market on June 21 amid the escalating fiscal crisis and after the Federal Reserve refrained from starting another round of debt buying. More than $3.6 trillion has been erased from the value of global equities since March 31, data compiled by Bloomberg show.

Money managers pulled $193 million from commodity funds in the week ended June 27, according to data from Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Investor outflows were $8.2 billion in May, the highest monthly total since a record $9.8 billion in September, Barclays said on June 25, citing its measure of exchange-traded products, index- linked funds and medium-term notes.

Morgan Stanley

Morgan Stanley stuck with recommendations that investors buy gold, copper and iron ore. As Europe’s crisis threatens growth, investors should seek “exposure only to those metals and bulk commodities that reflect the benefits of tight supply conditions and pockets of residual demand strength,” analysts Peter Richardson and Joel Crane said in a report June 28.

Rio Tinto Group, the world’s third-largest mining company, said June 29 that economic growth in China will accelerate in the second half of this year even as European turmoil escalates. The Asian country is the world’s biggest consumer of everything from aluminum to cotton to pork.

Funds boosted their bullish oil wagers for the first time in eight weeks, increasing the net-long position by 1 percent to 124,017 contracts, CFTC data show. New York futures surged 9.4 percent on June 29, the biggest gain in more than three years.

Farm Bets

A measure of 11 U.S. farm goods showed speculators raised bullish wagers in agricultural commodities by 24 percent to 533,095 contracts, the biggest gain since February. Traders switched to betting on a wheat rally with a net-long position of 40,194 contracts, compared with a net-short holding of 5,182 the prior week, the government said.

Money managers boosted wagers on higher corn prices by 53 percent to 108,542 contracts, the highest since May 22. The grain surged 15 percent last week, the biggest gain since December 2008, after a government report showed inventories tumbled the most in 16 years and as dry weather parched fields.

Crops wilted as little or no rain fell in growing areas in the past month, according to the National Weather Service. A dry spell this severe happens only once every quarter-century, said Sal Gilbertie, who helps manage $79 million of assets as the president and chief investment officer of Teucrium Trading LLC in Santa Fe, New Mexico. The U.S. is the world’s biggest corn producer and exporter.

“Commodities are priced at a very good value right now,” said Bill Greiner, who oversees $13 billion of assets as chief investment officer at Mariner Wealth Advisors in Kansas City, Missouri. “That’s traditionally the time you want to step up and buy.”

To contact the reporters on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net; Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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Stocks Gain With Commodities on U.S. Data, China Bets

By Michael P. Regan and Rita Nazareth - Jun 28, 2012 4:44 AM GMT+0700

Stocks (MXAP) rose, halting a four-day slump in Europe and Asia, and commodities surged as growth in U.S. home sales and durable-goods orders topped forecasts and speculation grew that China will add to economic stimulus. The euro weakened for a third day. Treasuries were little changed.

The Standard & Poor’s 500 Index advanced 0.9 percent to 1,331.85 at 4 p.m. in New York. The Stoxx Europe 600 Index (SXXP) added 1.4 percent and the MSCI Asia Pacific Index rallied 0.7 percent. Energy shares led gains in the U.S. as oil climbed back above $80 a barrel. Spanish and Italian 10-year bonds fell as German Chancellor Angela Merkel reiterated opposition to joint euro- area debt. The euro lost 0.2 percent to $1.2468.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York. Photographer: Scott Eells/Bloomberg

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June 27 (Bloomberg) -- Bloomberg's Ellen Braitman reports on the performance of the U.S. equity market today. U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a second day, amid better-than-estimated housing and durable goods orders data while speculation grew that China will add to economic stimulus. (Source: Bloomberg)

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June 27 (Bloomberg) -- Kyle Harrington, founder of Harrington Capital Management, and Edward Dempsey, chief investment officer at Pension Partners LLC, talk about the outlook for U.S. stocks, commodity markets and their investment strategies. They speak with Cory Johnson and Alix Steel on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

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June 27 (Bloomberg) -- Gregory Peters, global head of fixed-income research at Morgan Stanley, talks about the outlook for U.S. markets and global investor sentiment. Peters, speaking with Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg Television's "Surveillance," also talks about European bond markets. (Source: Bloomberg)

The 1.1 percent increase in orders for durable goods eased concern that American manufacturing was faltering, while growth in pending home sales added to evidence the housing market was recovering. The China Securities Journal said the country may introduce “more proactive” policies to ensure stable growth in the world’s second-largest economy. European leaders prepared for a two-day summit starting tomorrow.

“The economic data was encouraging,” said Walter Todd, who oversees about $940 million as chief investment officer of Greenwood Capital in Greenwood, South Carolina. “It’s important to see that because most recently we’ve had weaker data here and in China while Europe came back to the forefront. Any policy moves out of China would certainly be welcomed. In addition, it’s the end of the quarter and you tend to see some buying around that time.”

Eight of the nine biggest gains in the S&P 500 were energy companies, led by rallies of more than 6 percent in Cabot Oil & Gas Corp., QEP Resources Inc. and WPX Energy Inc. JPMorgan Chase & Co., Bank of America Corp. and Coca-Cola Co. climbed at least 1.7 percent for the biggest gains in the Dow Jones Industrial Average, which jumped 92.34 points to 12,627.01.

Market Leaders

Monsanto Co. (MON), the world’s largest seed company, climbed 3.9 percent as earnings exceeded analysts’ estimates. Bristol-Myers Squibb Co. advanced 1.7 percent after the maker of the blood thinner Plavix doubled the size of its share buyback program. Facebook Inc. dropped 2.6 percent after at least 17 firms started to cover the social-networking company, with an average analyst share-price estimate below its initial public offering price of $38 a share.

An index of 11 homebuilders in S&P indexes surged 3 percent and closed at the highest level in almost four years. The index of pending home resales climbed 5.9 percent to 101.1, matching a two-year high reached in March, after a 5.5 percent decline in April, figures from the National Association of Realtors showed. The median forecast of economists called for a 1.5 percent gain in May.

Economic Data

Bookings for U.S. durable goods increased for the first time in three months, the Commerce Department said. The median forecast of 76 economists surveyed by Bloomberg News called for a 0.5 percent gain. Excluding orders for transportation equipment, which can be volatile, bookings for goods meant to last at least three years advanced 0.4 percent.

Today’s housing and durable-goods data helped assuage concern that the U.S. economic recovery was weakening.

“The U.S. does look better than Europe, other places in the world, clearly,” Gregory Peters, chief cross-asset strategist at Morgan Stanley, told Bloomberg Television. “We’ve seen a lot of benefits from that, so a lot of flows into the U.S. But I think the story is that investors are hiding out in U.S. equities, U.S. risk markets, at a time when the U.S. economy is slowing, we’re facing the fiscal cliff, and earnings expectations are way too high.”

Stock Skew

Concern that Europe’s crisis will snuff out earnings growth sent the cost of protecting against losses in the S&P 500 to a five-year high. Puts protecting against a 10 percent decline in the benchmark gauge for American equities cost 1.73 times more than calls betting on a 10 percent gain, according to data on three-month contracts compiled by Bloomberg. The price relationship known as skew rose to 1.95 last week, the highest level since July 2007.

The Federal Reserve reduced its estimate last week for expansion in gross domestic product and U.S. consumer confidence dropped for a fourth month in June. The S&P 500 lost 6.3 percent from the end of March through yesterday, leaving it poised for the first retreat in three quarters. Analysts forecast earnings declined 1.1 percent in the second quarter, the first decrease since 2009.

European Shares

The Stoxx 600 rebounded from a four-day, 2.8 percent retreat as banks and energy companies led gains. Spain’s Bankia SA and Italy’s Banca Popolare SC surged at least 4.8 percent to help lead gains. Barclays Plc rallied 1.9 percent even after it was fined 290 million pounds ($453.2 million) for submitting false London and euro interbank offered rates.

Portugal Telecom SGPS SA climbed 3.1 percent after announcing a 200 million-euro ($250 million) share buyback. Glencore International Plc shares fell 1.5 percent after target Xstrata Plc’s second-largest shareholder asked for a higher bid.

Spanish 10-year yields increased five basis points to 6.93 percent, while Italian 10-year rates added two points to 6.20 percent after earlier declining nine basis points.

Germany’s Merkel shut the door to joint euro-area bonds as a means of lowering Spain’s borrowing costs, saying they are the “wrong way” to achieve the greater European integration needed to stem the debt crisis. Speaking three hours after Spanish Prime Minister Mariano Rajoy made a plea for help from tomorrow’s European summit, Merkel said that euro bonds, euro bills and debt redemption funds are unconstitutional in Germany and economically “wrong and counterproductive.”

‘Disorderly’

“At some point, the Germans are going to decide, ’do I take the credit risk of backstopping Italian and Spanish debt in exchange for some loss of national fiscal sovereignty by Italy and Spain?’” Nouriel Roubini, the co-founder and chairman of Roubini Global Economics, told Bloomberg Television’s “Surveillance.” “In which case, the euro zone has a chance to survive. Or otherwise this thing may become disorderly in the next few months.”

Cocoa, lean hogs, sugar and corn rallied at least 1.4 percent as 15 of 24 commodities tracked by the S&P GSCI Index gained, sending the index up 0.8 percent for a fourth straight gain. The commodities gauge has rebounded after slumping to the lowest level since October 2010 on June 21.

Natural gas trimmed earlier gains, trading up 0.3 percent after rallying as much as 6.5 percent. The fuel has surged 10 percent in five days. The National Weather Service predicted temperatures will be above normal east of the Rocky Mountains through July 9, spurring demand for the power-plant fuel as air- conditioning use increases.

The MSCI Emerging Markets Index (MXEF) advanced 0.8 percent, its steepest gain since June 19. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong advanced 0.7 percent. Benchmark gauges in Russian, Turkey, Indonesia, Thailand and the Philippines gained more than 1 percent.

To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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Oil Rises Most in a Week in New York on Greek Election Optimism

By Ben Sharples - Jun 18, 2012 6:31 AM GMT+0700

Oil rose to the highest in a week as projections showed Greece’s two largest pro-bailout parties winning enough seats to forge a parliamentary majority, easing concern Europe’s debt crisis will worsen and crimp fuel demand.

Futures gained as much as 1.9 percent in New York. The New Democracy and socialist Pasok parties won a combined 163 seats in the 300-member legislature, according to estimates from the Interior Ministry based on partially counted returns from voting yesterday. The prospect that anti-bailout party Syriza would gain control had rattled markets concerned Greece may quit the 17-nation Euro currency union.

Oil for July delivery advanced as much as $1.57 to $85.60 a barrel in electronic trading on the New York Mercantile Exchange, the highest intra-day price since June 11. It was at $84.73 at 9:36 a.m. Sydney time. The contract increased 12 cents to $84.03 on June 15, the highest close since June 8. Prices are down 14 percent this year.

Brent oil for August settlement rose 89 cents, or 0.9 percent, to $98.50 a barrel on the London-based ICE Futures Europe exchange. The front-month price for the European benchmark contract was at a premium to West Texas Intermediate of $13.53, up from $13.28 on June 15.

Syriza received 26.6 percent and 71 seats, the results showed. The vote forced Greeks, in a fifth year of recession, to choose open-ended austerity to stay in the euro or reject the terms of a bailout and risk the turmoil of exiting the 17-nation currency.

Crown Prince

The death of Crown Prince Nayef bin Abdulaziz Al Saud in Saudi Arabia, the world’s largest oil exporter, raised the issue of succession for the second time in less than a year.

Nayef, who also served as the kingdom’s interior minister for more than three decades, was interred yesterday in Mecca in an unmarked grave. King Abdullah, who is in his late 80s, attended the ceremony.

Nayef’s death leaves Prince Salman bin Abdulaziz as a leading contender for the crown prince position, as the kingdom grapples with high youth unemployment, security issues including the threat of al-Qaeda militants and unprecedented political change in the Middle East.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net

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Pelosi Joins Cantor Among Wealthiest U.S. House Leaders

By Heidi Przybyla - Jun 15, 2012 1:41 AM GMT+0700

House Minority Leader Nancy Pelosi and her Republican counterpart, Majority Leader Eric Cantor, are the wealthiest members of the U.S. House leadership, according to financial disclosure forms.

Pelosi, 72, of California tops the list of House leaders, with $40 million to $187 million in financial assets she reports with her husband, San Francisco commercial real estate investor Paul Pelosi. Most of their assets are listed as rental properties in California and partnership income in companies including investment management and restaurants.

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House Minority Leader Nancy Pelosi in the Capitol Visitor Center. Photographer: Tom Williams/CQ Roll Call/Getty Images

Cantor, 49, of Virginia listed financial assets including stocks and real estate holdings valued at almost $4 million to $9.6 million on his annual financial disclosure statement released today.

In the Senate, Minority Leader Mitch McConnell of Kentucky stands far above all his leadership counterparts, listing assets valued between at least $9.9 million and $44.5 million. Much of the wealth is held by his wife, Elaine Chao, who served as labor secretary throughout former President George W. Bush’s eight years in office.

Arizona Senator Jon Kyl, the chamber’s second-ranking Republican, reported assets between $467,000 and $1.08 million, with the bulk of it in individual retirement accounts.

Domino’s Pizza

Among Cantor’s biggest stock holdings is an investment of $500,000 to $1 million in Domino’s Pizza Inc. (DPZ) His wife, Diana, a former Goldman, Sachs & Co. (GS) vice president who is chairman of the board of the Virginia Retirement System, is a director of Domino’s Pizza and Media General Inc. (MEG), a Richmond-based newspaper and broadcast company.

The Cantors also own an Arlington, Virginia, condominium valued at between $500,001 and $1 million. He listed between $500,000 and $1 million in Bank of America bank accounts.

Maryland Democrat Steny Hoyer, the minority whip, is among the least wealthy House leaders.

He cited assets of $30,000 to $100,000. Hoyer reported he owes at least $100,000 and as much as $250,000 in a mortgage on his home in Mechanicsville, Maryland, to SunTrust Banks in Richmond.

Financial disclosure forms filed by members of Congress require lawmakers to state the value of holdings in broad ranges. Precise figures aren’t made public.

Mutual Funds

House Speaker John Boehner, an Ohio Republican who once owned a small business, listed unearned income of at least $10,116 and as much as $46,700 from mutual-fund dividends or capital-gains distributions.

Boehner listed assets valued between $1.8 million and $5.4 million. All of his stock and bond investments in companies including Intel Corp., Home Depot Inc., Honeywell International Inc., Pfizer Inc. and JPMorgan Chase & Co. (JPM) were through individual retirement accounts. He and his wife, Debbie, who works as a real estate agent, didn’t report a mortgage on their home near a golf course in suburban Cincinnati.

Pelosi, who yielded the speakership to Boehner after Republicans won control of the House, and her husband own a vineyard in St. Helena, California, valued between $5 million and $25 million.

Reid’s Assets

In the Senate, Majority Leader Harry Reid of Nevada is the wealthiest Democratic leader, listing assets between $2.78 million to $6.19 million, with much of his net worth in real estate holdings in his home state of Nevada and in Arizona. Reid, the son of a Nevada hard-rock miner, has holdings in bonds and stock mutual funds and other investments.

Patty Murray of Washington state, the fourth-ranking Senate Democrat and the only woman in the chamber’s leadership, listed assets between $564,000 and $1.5 million. Senator Charles Schumer of New York, the chamber’s third-ranking Democrat, listed assets of $320,000 to $950,000.

About 20 percent of U.S. House members applied for filing extensions this year.

Members of Congress are required to report details of mortgages on their personal residences for the first time this year, a provision included as part of a congressional ethics law. While the Senate required members to list the terms of their mortgage -- including interest rates, length and points used to pay down their rates -- the House didn’t.

Mortgage Rates

Among lawmakers paying the highest home-mortgage interest rates is Schumer, who has a 15-year mortgage taken out in 2002 at 6.85 percent.

House Financial Services Committee Chairman Spencer Bachus, an Alabama Republican who will preside over a hearing on JPMorgan next week, has 2 mortgages with the bank, according to federal disclosure documents. JPMorgan chief executive Jamie Dimon is scheduled to testify before the committee on June 19.

Senate Democrat Jay Rockefeller of West Virginia reported among the best interest rates on a 1998 loan from the United National Bank of Charleston. It is listed as New York Prime minus 1 percent. As of June 13, the prime rate was 3.25 percent.

Today’s filings also show what gifts lawmakers have received. Representative Gary Ackerman, a New York Democrat, acknowledged exceeding legal limits. Ackerman, who is retiring at the end of the year, accepted a “priceless” gift, according to his personal financial disclosure form. What did the Long Islander get?

“The blessed opportunity for 30 years to pay back, in some small measure, the good things that happened to me.” And who gave it to him? “The people,” his form said.

To contact the reporters on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider in Washington at jschneider50@bloomberg.net.

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Oil Falls From Eight-Month Low Before OPEC Meets on Production

By Ben Sharples - Jun 14, 2012 8:58 AM GMT+0700

Oil fell from the lowest close in eight months in New York before OPEC meets to discuss production quotas amid speculation the group won’t cut output as the global economy weakens.

Futures declined as much as 0.4 percent today, dropping for the fifth time in six days. The Organization of Petroleum Exporting Countries, which meets in Vienna today, will probably maintain its output ceiling as concern that global growth is shrinking outweighs calls for supply cuts to stem sliding crude prices, three of the cartel’s oil ministers said. U.S. retail sales fell and Spain’s debt rating was cut by Moody’s Investors Service.

“OPEC is the top news at the moment and that’s going to be the driver,” Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty in Sydney, said in a telephone interview. “OPEC is opaque at times and one of the issues that they grapple with, given that they are such a large and global organization, is compliance with quotas.”

Oil for July delivery slid as much as 35 cents to $82.27 a barrel in electronic trading on the New York Mercantile Exchange. It was at $82.37 a barrel, down 25 cents, at 11:55 a.m. Sydney time. The contract fell 0.8 percent yesterday to $82.62, the lowest close since Oct. 6. Prices are down 17 percent this year.

Brent oil for July settlement, which expires today, slipped 23 cents to $96.90 a barrel on the London-based ICE Futures Europe exchange. The more-actively traded August future slid 37 cents to $96.31. The European benchmark contract’s premium to West Texas Intermediate was at $14.52, from $14.51 yesterday.

OPEC Output

Ministers from Ecuador, Kuwait and Nigeria said yesterday that OPEC is set to keep its 30 million barrel-a-day limit. Venezuela, Iran, Iraq, Angola, Ecuador and Libya have argued that crude supplies are excessive.

While an increase of as much as 1 million barrels a day suggested by some Gulf Arab countries would help Europe weather its slowdown, the 12-member group will probably settle on the status quo, according to two Middle Eastern delegates who declined to be identified because a decision hasn’t been made.

The International Energy Agency reduced its forecast for 2012 crude consumption to 89.9 million barrels a day, the Paris- based energy adviser said yesterday. That’s revised down by 100,000 barrels from May and reflects an increase of 820,000 barrels from last year.

U.S. retail sales fell 0.2 percent in May, matching the revised decrease for April, Commerce Department figures showed yesterday in Washington. Spain was cut three steps to Baa3 from A3 by Moody’s, which cited the nation’s increased debt burden, weakening economy and limited access to capital markets.

Oil Stockpiles

U.S. crude-oil supplies dropped 191,000 barrels last week, a report from the Energy Department showed yesterday. They were forecast to slip 1.5 million barrels, according to the median estimate from 12 analysts in a Bloomberg News survey.

Gasoline stockpiles declined 1.7 million barrels, the report showed. They were projected to rise 1.4 million barrels, according to the survey. Distillate inventories, a category that includes heating oil and diesel, slid 63,000 barrels compared with a forecast 1.2 million barrel gain.

Companies operated refineries at 92 percent of capacity last week, up 1 percentage point from the prior week and the highest level since August 2007, the report showed.

Demand for fuels averaged 18.7 million barrels a day over the past four weeks, the Department reported. That’s down 1.9 percent from a year ago. This is “reflecting the ongoing weakness in macro data,” according to a report yesterday from Michael Wittner, global head of oil market research at Societe Generale SA in New York.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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Indonesian Tin Output Seen Falling as Global Demand Wanes

By Yoga Rusmana - Jun 13, 2012 9:02 AM GMT+0700

Refined-tin output from Indonesia, the world’s largest exporter, may drop this year as the European debt crisis slows economic growth and hurts demand, according to the head of an industry group.

“If prices stay at the current level, production will most likely decline,” Hidayat Arsani, president of the Indonesian Tin Mining Association, said in an interview yesterday in Pangkalpinang, capital of Bangka Belitung, the country’s biggest producing region. Output was about 90,000 metric tons last year.

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June 13 (Bloomberg) -- Pranay Gupta, chief investment officer for Asia at Lombard Odier, talks about the outlook for global financial markets and economies. Gupta also discusses Felda Global Ventures Holdings Bhd.'s initial public offering. He speaks in Hong Kong with Zeb Eckert on Bloomberg Television's "First Up." (Source: Bloomberg)

Tin has lost 24 percent from a six-month high in February as Europe’s crisis and slower growth in China reduced sales of the metal used in soldering and packaging. Prices below $20,000 a ton have some adverse impact on small-scale production in Indonesia, which is entering the peak season for output and exports, according to ITRI Ltd. Research Manager Peter Kettle.

“The big question at the moment is whether lower tin prices will result in a fall in small-scale mine production,” Kettle said by e-mail. “Most of them should still be covering cash costs at current prices.”

Three-months tin ended at $19,700 a ton on the London Metal Exchange yesterday. While that’s 2.6 percent higher this year, the metal declined in the four months through to May in the worst run since the global recession in 2008. The price peaked this year at $25,880 a ton on Feb. 8.

Indonesia represents about 40 percent of global exports, according to St. Albans, England-based ITRI, an industry group. Bangka Belitung accounts for about 90 percent of output and shipments. Exports in the first five months fell 4 percent to 37,668 tons, according to data from the Trade Ministry.

‘Clear Surplus’

While slower Chinese demand had helped push the global market into a “clear surplus” at present, a shortage may reemerge in the second half as growth reaccelerates, according to Barclays Plc. Tin may gain to $30,000 by the year-end, with a full-year deficit of 5,000 tons, according to a May 14 report.

Producers in Bangka Belitung agreed to suspend spot shipments in the final quarter of last year to try boost prices to $25,000. The voluntary curb, which didn’t cover contractual sales, was dropped Dec. 31. Prices fell in the quarter.

The Indonesian Tin Mining Association, also known by its Indonesian initials of ATTI, replaced the Indonesian Tin Association, which was dissolved as it didn’t get support from the Bangka Belitung administration. Arsani, previously president of the old group, was installed yesterday as the head of ATTI by Bangka Belitung Governor Eko Maulana Ali.

To contact the reporter on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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Chesapeake Oil Well Is Biggest Gusher in Company History

By Joe Carroll - Jun 2, 2012 3:16 AM GMT+0700

Chesapeake Energy Corp. (CHK) said it drilled the largest oil gusher in the company’s 23-year history at a “significant” discovery in the Anadarko Basin of Texas and Oklahoma.

The Thurman Horn 406H well in the Hogshooter formation produced 5,400 barrels of crude a day during its first eight days of operation, Chesapeake said today in a statement. The output was more than twice that of some of the best performing wells in the Eagle Ford shale of south Texas, which Chesapeake counts as its most valuable holding, said Michael Kelly, an analyst at Global Hunter Securities LLC in Houston.

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Drilling operations for Chesapeake Energy Corp. Photographer: Daniel Acker/Bloomberg

“It’s pretty massive,” Kelly said in a telephone interview. “In the Eagle Ford or the Bakken shale, you’d be ecstatic if you got initial production anywhere close to 2,000 barrels a day, so this is really remarkable.”

The discovery will accelerate the second-largest U.S. natural-gas supplier’s shift to more profitable crude production, Chief Executive Officer Aubrey McClendon said in the statement. Chesapeake shares have dropped 28 percent this year as gas prices hit a 10-year low and probes began of McClendon’s personal finances. Gas comprises more than 80 percent of the Oklahoma City-based company’s output.

Chesapeake is seeking to sell $20.5 billion in assets by the end of 2013 to fill a cash-flow shortfall. The Hogshooter wells aren’t among the assets for sale, Jim Gipson, a Chesapeake spokesman, said today in a separate e-mailed statement.

Hogshooter Drilling

The shares fell 7.8 percent to $15.58 at the close in New York as natural-gas futures dropped to a four-week low, capping the largest weekly decline since January.

The Thurman Horn 406H well, which reaches a depth of 10,000 feet (3,000 meters), also pumped 4.6 million cubic feet of gas and 1,200 barrels of natural gas liquids daily.

“It’s the best oil well in the history of the company,” Gipson said.

Apache Corp. (APA) drilled two wells in the Hogshooter formation in 2010 that produced more than 2,000 barrels of oil a day. The wells were 15 miles (24 kilometers) apart, indicating there might be “meaningful potential” across a wide area, the company said at the time.

Chesapeake has 65 more Hogshooter sites identified for drilling in the next few years. Rig costs and other drilling expenses are already factored into the capital budget, so no increase in total spending will be required, the company said.

Variable Results

The next step for Chesapeake is to prove it can achieve similarly high rates of production at other sites in the formation, said Manuj Nikhanj, head of energy research at Investment Technology Group Inc. (ITG) in Calgary. Other explorers such as Forest Oil Corp. (FST) have drilled promising wells at Hogshooter only to get disappointing outcomes nearby, he said.

Chesapeake’s Hogshooter results “are impressive to say the least,” Nikhanj said in an e-mailed statement. “The usual caveats around this region are that the well results are highly variable from one location to the next so repeatability is questionable.”

A second Chesapeake well in the Hogshooter formation, known as Meek 41 9H, had average daily production of 1,300 barrels of oil, 365 barrels of liquids and 1.4 million cubic feet of gas during its first 27 days of operation, the company said. Two additional wells in the formation are awaiting completion.

The Hogshooter formation sits atop the company’s existing holdings in the Granite Wash formation, according to the statement. Chesapeake owns 88 percent stakes in the four Hogshooter wells and 30,000 acres of leaseholds.

Exxon Mobil Corp. (XOM) is the largest U.S. gas producer.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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Gold Poised for Worst Monthly Run in 11 Years on Europe

By Debarati Roy and Maria Kolesnikova - Jun 1, 2012 1:33 AM GMT+0700

Gold futures fell in New York, capping the longest monthly slump since 2000, as Europe’s worsening debt crisis and signs of a U.S. economic slowdown crimped demand for the precious metal.

Higher borrowing costs in Spain are putting pressure on Mariano Rajoy’s five month-old government to join Greece, Portugal and Ireland in seeking a rescue that would be the European Union’s biggest. First-time claims for U.S. jobless benefits rose by 10,000 to 383,000 last week, the Labor Department reported today. The Standard & Poor’s GSCI index of 24 raw materials fell as much as 1.5 percent and was headed for its biggest monthly drop since the recession in October 2008.

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“There’s definitely been a flight to the dollar rather than gold as a shelter from the crisis in Europe , which doesn’t look like it will abate soon,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage. “We’re encouraged by the gains made by gold yesterday even as the dollar strengthened.” Photographer: Victor J. Blue/ Bloomberg

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May 31 (Bloomberg) -- Dominic Schnider, Singapore-based global head of commodity research at UBS AG's wealth management unit, talks about the outlook for gold prices and demand. Schnider speaks with Zeb Eckert on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

“Gold is behaving like a classic commodity and declining along with the pack,” Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “It’s like the dead man walking.”

Gold futures for August delivery retreated 0.1 percent to settle at $1,564.20 an ounce at 2 p.m. on the Comex in New York. The precious metal retreated 6 percent this month, the biggest drop this year as the dollar rallied 5.4 percent. Holdings in the bullion-backed exchange-traded products are set for a third monthly decline, data compiled by Bloomberg show.

“Investors don’t have the same strategic approach to gold as before,” Edel Tully, an analyst at UBS AG, said in a report today. “Much of the exposure to gold has been on an intra-day bias of late. The market is too highly correlated with risk for many participants’ liking.”

Silver futures for July delivery fell 0.8 percent to $27.757 an ounce on the Comex, extending the month’s loss to 11 percent. The metal’s third monthly loss is the longest slump since 2008.

On the New York Mercantile Exchange, platinum futures for July delivery jumped 1.2 percent to $1,417.60 an ounce, helping narrow the month’s loss to 9.8 percent. Palladium futures for September delivery rose 1.2 percent to $613.90 an ounce. Still, prices fell 10 percent in May, the biggest monthly drop since September.

To contact the reporters on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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Oil Trades Near Weekly Low as U.S. Supplies Seen Rising

By Ben Sharples - May 30, 2012 9:13 AM GMT+0700

Oil fell for a second day, heading for the biggest monthly drop in two years, before a report that may show stockpiles climbed to the highest level since 1990 in the U.S., the world’s biggest crude user.

Futures slid as much as 0.5 percent. U.S. inventories rose 800,000 barrels to 383.3 million last week, according to the median estimate of eight analysts in a Bloomberg News survey before the Energy Department report tomorrow. Prices dropped yesterday after Spain’s credit rating was cut and BNP Paribas SA reduced its 2012 forecast for West Texas Intermediate oil.

“Demand out of the U.S. and the euro zone has been very soft,” David Lennox, an analyst at Fat Prophets in Sydney, said in a telephone interview. “For the foreseeable future, barring any supply-side shocks, oil will stay around $90 a barrel. If there’s going to be any movement, it’s not likely to be up.”

Crude for July delivery decreased as much as 45 cents to $90.31 a barrel in electronic trading on the New York Mercantile Exchange, and was at $90.34 at 12:07 p.m. Sydney time. The contract yesterday slid 10 cents to $90.76, the lowest close since May 24. Prices are down 14 percent this month, the biggest drop since May 2010.

Brent oil for July settlement fell 43 cents, or 0.4 percent, to $106.25 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate was at $15.91, from $15.92 yesterday.

Fuel Supplies

Oil in New York has long-term technical support at $89.83 a barrel, according to data compiled by Bloomberg. On the weekly chart, that’s the 50 percent Fibonacci retracement of the drop to $32.40 in December 2008 from an intraday record high of $147.27 in July that year. Buy orders tend to be clustered near chart-support levels.

U.S. gasoline stockpiles probably fell 250,000 barrels last week, according to the Bloomberg survey before tomorrow’s Energy Department report. Distillate supplies, a category that includes heating oil and diesel, will likely remain unchanged at 119.5 million barrels, the survey shows.

The American Petroleum Institute will release separate inventory data today. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

U.S. gasoline at the pump fell below year-earlier levels for the sixth straight week, the Energy Department said in a weekly retail report yesterday. The national average price for regular gasoline dropped 4.5 cents to $3.669 a gallon from a week earlier, it said.

Oil Forecast

BNP Paribas cut its 2012 price forecast for New York crude by $7 to $100 a barrel, and its estimates for Brent by $4 to $115 a barrel, as Europe’s debt crisis worsened, according to an e-mailed report. Prices will still advance in the third quarter because of sanctions against Iran and shrinking spare production capacity in the Organization of Petroleum Exporting Countries, the bank said.

Oil fell yesterday as the euro slid toward an almost two- year low after Egan-Jones Rating Co. cited a deteriorating economic outlook in Spain for its decision to lower the nation’s sovereign credit rating to B from BB-. A weaker European currency increases the cost of crude priced in dollars.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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