RBS Plans Complete Exit from Commodities, JPM Charges In

Eighty percent of the precious metals trading at RBS is in gold, and now RBS wants to disband this business too (in 2010, non-US assets of RBS Sempra Commodities were sold to JP Morgan for $1.7bn). RBS is one of the banks marred in the interest rate rigging scandal.

In contrast, JP Morgan, a licensed depositary for precious metals, has asked the CME for approval for additional vault space and applied to be a weight master for silver. Value chain optimisation - here we come!

Tracking Gold Volatility via Gold Volatility Indexes

The CME Group has a series of volatility indexes based on the methodology of the "classic" VIX index.

Here's a quick revision of the VIX.

VIX is the TICKER SYMBOL for the Chicago Board Options Exchange Market Volatility Index and is also known as the "fear index" or the "investor's fear guage". It measures implied volatility of short-dated S&P 500 index options. Trading in futures on the VIX began in March 2004. From February 2006, trading on VIX options became possible.

The GOLD VIX is a similar product from the CME Group (which includes the COMEX). If you see the acronym GVF on the COMEX website - that means Gold Volatility Futures. There's not much volume on that yet, though.

Is Pearl GTL ready for full production?

Shell's Pearl GTL project, situated 80km north of Doha, was due to reach full production in mid 2012, but is late and experiencing cost overruns. It is a gas-to-liquids project aiming to convert gas into valuable liquid products like gasoil and liquid ethane (used to produce ethylene). The raw gas is coming from the North Field, roughly the size of Qatar itself.

Shell is into Qatar in a big way, but an even bigger investor is Exxon Mobil, who have invested $30bn over 10 years (Forbes) to build the world's largest collection of LNG export terminals. An export terminal is where gas is liquefied, stored and shipped to other destinations.

BP goes Kangaroo

Kangaroo bonds are AUD bonds sold by international (non-Ozzie) issuers. BP's first issue takes place now with an A$500m issue at a coupon of 4.5% and is issued by BP Capital Markets (largest kangaroo issue this year, according to UBS, who are the joint "promoters" for the bond aka "bookrunners", together with ANZ). 75% allocation goes to asset managers and insurance funds. Part of the enthusiasm for issuing Kangaroos is the shift in the cross-currency basis swap.

Gazprom latest to Axe Large Capital-Intensive Projects

First it was BHP Billiton's announcement that they were downsizing the Olympic Dam project. Now Gazprom is the latest firm to cut capital spending as it dumps it Shtokman gas field project in the Arctic due to excessive costs. Shtokman contains nearly four trillion cubic metres of gas making it one of the world's largest natural gas fields. The head of Gazprom's production, Mr Cherepanov, said the project was too expensive "for the time being". Total and Statoil were partners in the project (Gazprom had selected them as partners), with 25% and 24% stakes respectively. The oversupply from the US shale gas boom has changed the dynamics of gas exploration across the industry. Gazprom trades on a number of exchanges including the Moscow Exchange, LSE and Berlin and Frankfurt Stock Exchanges and is Russia's largest listed company. The news comes just as Shell has gained permission to drill for oil in the Arctic off the cost of Alaska.

Japan - World's Largest LNG Consumer - Reduces its Bid Price for Asian Cargoes

Asia:
Asian LNG has slipped below $13 per mmBtu as the stockpiling from Japan and Korea and mild weather (reducing air conditioning demand) has given East Asia more bargaining power in the market for seaborne cargoes. According to Reuters, Kogas is not paying more than $12.50 with Indian importers paying up to $2 less per mmBtu owing to lower transport costs.

Europe:
In the UK the price of wholesale gas went up due to summer maintenance schedules at North Sea fields.

US (Henry Hub):
Henry Hub spot is around $2.74 and future at $2.80. Another US benchmark is New York City Gate spot (the diff between Henry Hub price and another hub being known as "location differential"). Major pricing locations include "citygates" which are places where distribution companies receive gas from a pipeline. NYC Gate spot is commonly used for pricing gas in the north-eastern US. Other city gate locations include Boston, Baltimore, Pittsburgh and Buffalo (second most populous city in the State of New York, originally the "Village of Buffalo" with 25 residents).

Citygate prices include the premium paid for delivery to the "citygate" from the main market centre (Henry Hub in Louisiana, adjacent to Texas and Mississippi). The Henry Hub is where gas is channelled to smaller distribution lines.

What factors do you think influence the city gate prices most? Henry Hub spot, weather patterns or inventory levels?

Serco Drop in H1 Profit

British outsourcing firm Serco that runs air traffic control centres, Britain's DLR and the Dubai Metro are bullish despite the 17% drop in H1 profit. 46% of its income is made outside of the UK. Serco is particularly strong in public sector outsourcing. The National Physical Laboratory in  (Richmond upon Thames, London) is also run by Serco.