by Todd Shriber

Exxon Mobil, take note. A day after the largest U.S. oil company signed a multi-billion dollar exploration pact with Rosneft, Russia’s largest oil company, masked police officers armed with assault rifles raided the Moscow office of competitor BP.

Call it coincidence, call it rubbing salt in BP’s wounds, but whatever your pleasure, the timing of the raid is odd considering that it was BP, Europe’s second-largest oil company, that was originally supposed to partner with Rosneft.

Only the folks at Exxon can say for sure whether they are smart enough to realize what they’re getting into. But raids in Russia on the offices of western companies doing business there aren’t uncommon. BP has had its share, and Germany’s Deutsche Bank was on the receiving end of a raid in February, The New York Times reported.

Wednesday’s raid on BP’s Moscow office was authorized by a Siberian court that is scheduled to hear a case involving the British oil company and private investors in TNK-BP, BP’s Russian joint venture according to the Times. The case stems from the TNK-BP investors being irked by BP pursuing a relationship with Rosneft. The Siberian lawsuit was based on the allegation that BP executives serving on the board of directors of TNK-BP violated their fiduciary obligation,

BP Russia President Jeremy Huck told the newspaper that the company believes “these legal actions are without merit and appear to be part of a pressure campaign against BP’s business in Russia.”

Potentially worse for Exxon is that its accord with Rosneft, which will see the two companies tap the oil-rich Kara Sea, is that the American company will now be firmly ensconced in the politics of Russia’s oil business, and those can be choppy waters. Eurasia Group said the “politics of the Russian energy sector remain treacherous,” the Times reported. The raid on BP’s Moscow’s office underscores that point.

To be sure, doing business anywhere in Russia is no picnic. Moscow has been condemned by some of its own media outlets for not doing enough to fight corruption. And Russia’s reputation as one of the most corrupt countries in the world is well-documented.

In 2010, NGO Transparency International ranked Russia 146th out of 180 countries in the world, with 180 being the worst, when it comes to corruption. The organization said that bribe-taking was a $300 billion annual enterprise in the “R” in BRIC, according to Reuters.

Russia’s corruption score is so bad that it ranks behind most of Africa and a fair amount of the former Soviet republics, according to the Guardian.

Exxon, you’ve been warned.

by Todd Shriber

Perhaps one reason for the nasty tumble gold took on Tuesday can be attributed to folks at the Shanghai Gold Exchange doing its best CME Group (CME) impression and raising forward gold margins by 12%.

That hike goes into effect on Friday. And the Shanghai Gold Exchange, China’s primary precious metals exchange, will also widen daily trading limits for those gold contracts to 9%, up from 7%, according to Reuters.

As was the case with CME and its silver margin increases earlier this year, the folks in Shanghai aren’t timid about multiple margin increases in short amounts of time. Before August, the Chinese exchange hadn’t raised gold margins once this year. Now, the exchange is up to two margin increases just this month and there are six trading days left in August.

For its part, CME has resisted raising gold margins since Aug. 11, but that hasn’t dampened speculation that the exchange operator is preparing to throw another curve ball at gold bulls. Last Friday, Interactive Brokers told its clients that a CME margin increase on gold was “imminent,” according to The Wall Street Journal.

How effective the margin hikes by any exchange operator are on gold remains to be seen. After all, even with Tuesday’s slide, the SPDR Gold Shares (GLD) fund is higher than where it was on Aug. 11.

Disclosure: Writer is long gold through the iShares COMEX Gold Trust (IAU).

by Todd Shriber

A prime beneficiary of the seemingly never-ending bull market for gold has been the SPDR Gold Shares (GLD), an exchange-traded fund that made its debut in November 2004 as the first ETF listed in the U.S. to be backed by physical gold holdings.

For years, GLD could lay claim to being far and away the largest commodities ETF in the world ranked by assets, but it could never seem to usurp the SPDR S&P 500 Trust (SPY) for the title of world’s largest ETF… until Monday that is. As Trader Daily noted last week, the gap between GLD and SPY had narrowed substantially in recent weeks. But GLD finally got over the hump on Monday. The change atop the ETF assets leader board is attributable to both SPY hemorrhaging assets and GLD packing assets on.

At the start of this year, SPY had $89.9 billion in assets under management while GLD had $58 billion, the Financial Times said. Fast-forward to an environment where investors are shunning stocks and gold’s status as a safe haven has arguably never been stronger, and GLD now wears the golden crown as king of ETF assets.

To be exact, GLD had $76.6 billion in assets as of Monday’s close, compared to $74.3 billion for SPY. That comes as gold is hovering around $1,900 an ounce.

One can only speculate on what GLD’s asset haul will be if gold prices reach $5,000 an ounce, as Ned Davis Research says the yellow metal can, according to Barron’s.

by Paul Springer

An ongoing series of debacles has sent gold prices to the moon, leading to concerns for not only investors but also jewelry owners who are now more likely to get robbed.

Bloomberg reports that surging gold prices are producing all sorts of theories about the commodity’s future. One is just plain bullish:

Gold’s rally to a record near $1,900 an ounce has pushed the metal to overbought levels, according to a number of technical analysis tools. Economist Dennis Gartman was quoted Monday saying prices will go “parabolic.”

At the same time, many are wondering if gold is riding for a fall. Reuters talked to some skeptics after gold retreated from the $1,900 per ounce level Monday. “People talk about gold as an insurance premium, but right now it’s a really high insurance premium to pay,” LGT Capital Management analyst Bayram Dincer said.

Seeking Alpha posits five different situations that could lead to a gold drop – one of which is the good news scenario of economic growth. While that doesn’t seem likely in the short term, changing U.S. currency policies could have an impact:

The gold rally began back in January 2002, which was simultaneous with U.S. policy makers adopting a weak dollar policy. And the rapid acceleration in the gold price since the financial crisis has been supported by the further depreciation of the dollar coupled with competitive currency devaluations worldwide. But it was not that long ago that Gold was mired in a two decade long bear market, which coincided with a period of U.S. dollar strength. Thus, if U.S. policy makers decided to truly shift their stance toward promoting a stronger dollar at some point in the future, this would be bearish for gold and could mark the end of the current bull market.

ETFs have amassed huge physical and futures holdings in gold, and gold prices could suffer if investors liquidate ETF holdings, The Financial Times says.

Jon Bergtheil, an analyst at Citigroup cautioned that gold prices might suffer if ETF investors cashed in their holdings to finance losses in equity markets.

Mr Bergtheil said ETF flows were an important barometer of investment demand, which has risen from 4 per cent of total demand in 2000 to over 39 per cent in 2010.

Meanwhile, the publicity surrounding the glittering metal’s rise in values has encouraged another means of getting ahold of the substance: stealing.

Gold grabbing is getting out of control, The L.A. Times says:

That stunning rise in the price of gold is having a ripple effect: A rash of jewelry store robberies, street muggings and home burglaries. Now, merchants are stepping up security and police are warning everyone against flaunting their bling.

It’s also a problem in the U.K., according to The Express & Star:

The crime wave leaves no trace and the increase in the number of independent gold dealers, many of whom do not ask for ID, means police are struggling to tackle the problem.

It remains to be seen whether the craze for gold pilfering corresponds with a slow down in bank robberies. That might well be the case in the U.S., especially if the Fed decides to print up another boatload of cash and dispense it in a new corporate welfare program.

by Paul Springer

As consumers and regulators continue to sputter about speculation driving up oil costs, the leakage of Commodity Futures Trading Commission data sheds new light on the trading behind the ugly $5-per-gallon prices in 2008.

Someone who remains nameless provided confidential CFTC position reports to U.S. Sen. Bernie Sanders, who leaked the data to The Wall Street Journal:

The data that was leaked to the Wall Street Journal was compiled by the CFTC in 2008 during a “special call” in which the agency sought crude oil position data from swap dealers so they could piece together market activity occurring both on and off the exchange, people familiar with the matter said.

Both a list of long/short positions in various commodities and a chart of who was trading what are available from Reuters.

One thing that quickly emerges is that prices did not go up because everyone jumped on the bull wagon. Plenty of traders were short.

However, many were trading past exchange limits by making off-exchange transactions. Trading on multiple exchanges isn’t illegal, but trading all over the place makes it difficult to assess an individual traders’ risk and assemble a net composite for how much is being traded.

The chart shows positions for energy traders, but a diverse array of firms were trading back when gas prices shot up last time. The chart shows D.E. Shaw, Bridgewater Associates and Stichting Pensioenfonds ABP with the biggest positions in crude oil.

The biggest off-exchange positions were held in Singapore’s sovereign wealth fund and Stichting and Caisse de Depot et Placement pensions.

Schroders, D.E. Shaw and Bridgewater were active in a variety commodities, on and off exchange.

The senator believes the data indicate that speculators influence pricing too much. “This report clearly shows that in the summer of 2008… speculators dominated the crude oil futures market causing tremendous damage to the entire economy,” Sanders told The Wall Street Journal.

Not surprisingly, the futures industry lobby is not pleased with the leak, according to Reuters:

“This type of incident will have a chilling effect on derivatives trading in the U.S. because market participants will be reluctant to take the risk that their positions will be exposed to the public-and their competitors,” John Damgard, president of the Futures Industry Association, said in a statement sent to Reuters.

The Calgary Herald is among those that expects the data to turn up the volume on controvery about ongoing regulatory changes:

The leak of the data — which had been given to regulators confidentially in order to protect the firms’ positions — has sparked concern at the CFTC and outrage among some in the industry at a time when increasing government oversight is already threatening to curb some trading.

No one really wants more government, but there’s something about rising prices at the pump that puts Americans in a hostile mood – not that it’s ever done any good.

The Federal Trade Commission is currently investigating gas prices, and it remains to be seen how that turns out. It’s not the first time the commission has looked into the matter. A 2005 investigation found that the rise in high-volume gas station and market combinations actually reduced prices.

In the face of multiple record highs for gold in nominal terms, CME sent another one of their notoriously hard to find margin missives out on last week. Once again, the actual document cannot be found in the media section of CME’s web site, at least not yet.

Moaning and groaning aside, CME has increased margin requirements on existing Comex 100 gold futures contracts to $5,500 from $4,500. On new contracts, the rate goes to $7,425 from $6,075. Whether or not that news is what’s behind a small tumble in gold prices last week is up for debate, but as highlighted by the SPDR Gold Shares (GLD), gold’s move has been nothing short of parabolic and it might take more than a margin hike to derail this train.

What’s convenient about that GLD chart we included is that it extends all the way back to November 2010. CME raised gold margins back then too. As we now know, the rest is history.

Proving that it is an equal opportunity pain in the rear for some traders, CME apparently likes raising the cost of admission of the so-called safe haven plays. The exchange operator has boosted margin requirements on the Swiss franc by more than 440%, to no apparent impact.

In theory, boosting margin requirements increases the cost of trading and culls out some of the “frothy” fast money than can begin chasing momentum in high-volatility markets. In reality, though, as long as the potential profit is large enough, it will barely make a dent. Time will tell, but considering what gold has done over the past year, we’d be surprised if more than scant few traders are put off by putting down an extra $1,000 per contract

This may just be last straw for beleaguered shareholders of Petrobras (PBR), Brazil’s state-run oil major. After a decline that has spanned the better part of three years, making the stock one of the worst performing among major international integrated oil names, Petrobras is now home to rapidly rising short interest.

On July 5^th, short-sellers had borrowed 63.9 million shares, or 1.1% of the total of Petrobras shares outstanding, but that number

swelled to 178.8 million shares as of Aug. 5, or 3.2% of the total outstanding, according to Bloomberg data. That little tidbit came on a day when the New York-traded version of Petrobras plunged more than 10% and touched a new 52-week low before moderately recovering. The Brazilian listed shares printed their lowest price since December 2008.

News of the soaring short interest in Petrobras would be unwelcome in any form, but the company had more bad news for investors to digest this week. It plans to sell $13.6 billion in assets to raise cash for its massive $224.7 billion five-year spending spree could be imperiled due to plunging stock prices in Brazil, according to OilSlick.com.

Making Petrobras’ drop over the past year all the more troubling is the fact that the stock has lagged well behind the S&P 500 and even the downtrodden iShares MSCI Brazil Index Fund (EWZ), the largest Brazil-specific ETF available to U.S. investors

Perhaps the most graphic repudiation of the Petrobras investment thesis is this anecdote: Even BP (BP), Europe’s second-largest and probably the world’s most controversial oil company, has sharply outperformed its Brazilian counterpart in the past year.

All things considered, Petrobras is still one of the world’s most promising oil plays. But at the moment, management might want to cool it on the all the “we’re bigger than Exxon Mobil and Apple” talk. It’s going to be a while.

by Paul Springer

After hitting a 52-week high earlier this week, Imperial Sugar Co. (IPSU) made a dramatic reversal in the form of a plunge that took it down 57% by midday today.

It may not have been the best day ever for an earnings announcement.

Analysts had been expecting profits of around 50 cents per share. The number was actually $1.35 – but it had a minus sign in front of it.

Welcome to the wild world of commodity prices.

Just a day before the announcement, expectations were high for Imperial Sugar.

“A Positive Surprise Coming?” was the title of a Benziga post offering arguments for improvements in both revenues and earnings:

Speculation has been that positive surprises may be in store from this quarterly report and the next as the uptrend in refined sugar prices continues and production at two new refineries kicks into gear.

A day earlier Zacks Investment Research also reported positive expectations:

SmarTrend currently has shares of Imperial Sugar in an Uptrend and issued the Uptrend alert on April 28, 2011 at $13.59. The stock has risen 80.3% since the Uptrend alert was issued.

Now, the stock is under $10.

Sugar prices turned out to be the problem, not the solution for Imperial. The company got whipsawed by both raw prices on the production end and refined prices which were tamped down by competition.

The company talked about futures pricing in a news release on the earnings:

Raw sugar purchased during the quarter was priced largely against the March and May futures contracts, which peaked near $40 per hundredweight prior to the USDA import quota announcement in early April. The subsequent decline in the raw sugar futures market which occurred after the quota announcement was only temporary and the raw market has rallied back to near the same level. Our raw sugar costs in the fourth fiscal quarter should see little relief, while sales prices thus far in the fourth quarter have only improved modestly.

One typical response to rising raw material costs is to raise prices. In this case, the release says, heavy competition from companies in the U.S. and Mexico meant keeping prices down – or else.

To make matters worse, the company is working out some production issues, including sub-optimal output at a plant that suffered an “industrial accident” in 2008. Fourteen people died in that explosion, which the U.S. Chemical Safety Board says was “fueled by massive accumulations of combustible sugar dust throughout the packaging building.”

Just to make things more interesting for Imperial and other sugar refiners, Reuters reports that sugar prices have hit a one-month low as traders get out of everything that could be impacted by slowing global growth.

“Speculators don’t want to be in risky assets in case the European (debt) situation gets out of control,” Macquarie analyst Kona Haque told Reuters.

by Todd Shriber

Apparently it wasn’t just the debt ceiling debate that was roiling equity markets of the past couple of weeks as the major U.S. indexes all plunged on Tuesday, despite news that Uncle Sam will not default on U.S. debt obligations.

The S&P 500 fell for a seventh consecutive day, the worst stretch since 2008, erasing 2011′s gains in the process as investors continued to fret about the pace, or lack thereof, of the global economic recovery, according to Bloomberg.

Yet a curious safe haven may be emerging and, surprisingly enough, it comes from the always volatile world of agriculture commodities. That’s right, corn, one of the most volatile commodities out there, is providing some refuge from the market’s recent storm. From Bloomberg:

On the Chicago Board of Trade, corn futures for December delivery jumped by the exchange limit of 30 cents, or 4.4 percent, to close at $7.1575 a bushel at 1:15 p.m., the highest for a most-active contract since June 9.

And on a day when stocks and other so-called riskier assets were getting crushed, the Teucrium Corn ETV (CORN), which tracks a basket of various corn futures contracts, jumped nearly 3% and is now within sniffing distance of its 52-week high.

Other securities with a reputation for being safe havens are getting in on the party as well. Gold jumped to another record high in nominal terms, and the Swiss franc continues a move that can be considered parabolic at this point.  But corn as a safe haven? Who knew?

And this is no one-day phenomenon. As NPR notes, a combination of factors could contribute to even higher corn prices in the near-term.

by Paul Springer

A looming storm of subpoenas is setting the stage for a federal investigation of gas price manipulation. It remains to be seen whether the investigation will scare oil companies and their shareholders enough to create buying opportunities.

The idea of a government investigation into energy prices seems ludicrous – the government is practically a subsidiary of big oil. If ever there was an industry that could lawyer up and stall perpetually in court, it’s the energy industry.

It also seems unlikely that a legal distinction will reduce the scope of legitimate speculation, given the very gray and fuzzy demarcation between trading and manipulating the derivative-laden energy markets.

Then again, the Federal Trade Commission is undertaking this investigation, which will be a little different than a Securities and Exchange Commission or Commodity Futures Trading Commission inquiry in civil court.

An FTC inquiry can get legally involved in various ways, but the initial administrative complaint is heard by an administrative judge whose ruling is reviewed by the FTC commissioners. The commissioners rarely uphold the judge’s decision to dismiss an FTC lawsuit, and many of the administrative judges are former FTC commissioners.

Decisions can ultimately be appealed all the way to the U.S. Supreme Court. But the FTC has broad powers to ask embarrassing questions and demand information. The administrative procedure also means there’s no jury involved. This is significant in a matter involving complex financial matters.

Many a jury has been baffled into submission by defense attorneys capitalizing on the complexity of the issues.

An unidentified source told Bloomberg that the FTC has given refiners and oil companies several weeks of warning that subpoenas are going to arrive in an investigation of rising gasoline prices.

Several large players said they have not been contacted, while Chevron (CVX) declined to comment, Bloomberg says.

Politicians have been pestering the FTC to investigate gas prices since March, and the FTC said it was opening an investigation last month. The head of the National Petrochemical & Refiners Association put the inquiry into context by alluding to the failure of previous attempts to find wrongdoing, Reuters says:

Dozens of investigations of gasoline price fixing over the years have generated plenty of headlines and political hyperbole, but have failed again and again to find any evidence of wrongdoing.

Critics of the gasoline business speculate about macro issues involving capacity and manipulation of reserves, but there are also knotty issues at the gas station level. The Washington Post recently noted controversy over the way two wholesalers obtained 70% of the Washington-area retail gas market.

There’s nothing stopping an operator from selling stations under the proviso that the new owner will buy gas from the seller – at the seller’s prices. The Post says the situation presented a dumfounding conundrum to the city council, which had trouble measuring the dimensions of legitimate competition and determining how much control a station operator should have over prices:

The hard-pressed motorist has little or nothing at stake. Exactly how many gas stations “should” the District have and where? We have no idea — and neither does anyone on the D.C. Council.

In the big picture, the FTC is likely to end up in a similar predicament of paralyzing confusion. And gasoline prices will continue to rise, leaving consumers no alternative but to buy oil stocks as a hedge against being financially drained at the pump.