Playing a little catch-up this morning.
Do I hear $135?: That's what oil was trading for early this morning, though prices have pulled back at last check. Bloomberg reports that one reason for the recent run-up is that traders had been betting that oil prices would fall – and now they’re having to buy crude to cover those short positions.
Wall Street banks, hedge funds and other investors have been boosting spending on commodities such as oil for several years. Global investment in commodities rose by more than a fifth in the first quarter to $400 billion, Citigroup Inc. said April 7. In the last year, non-commercial market participants have raised bets on rising prices, known as long positions, by 37 percent to 263,378 contracts, the Commodity Futures Trading Commission said May 16. The rush to buy back contracts may be linked to the record number of short positions that had been built up in recent weeks by small-sized speculators, which the CFTC refers to as ``non- reportable'' traders because their holdings are small.
Sinking supplies: It looks like there's less oil available than previously thought, which might jack up prices even further. The International Energy Agency, which is the preeminent organization monitoring this stuff, has been predicting that supplies of crude would keep pace with rising demand, topping 116 million barrels a day by 2030. But the agency now says that aging fields and inadequate investment could change the picture. From the WSJ:
The IEA monitors energy markets for the world's 26 most-advanced economies, including the U.S., Japan and all of Europe. It acts as a counterweight in the market to the views of the Organization of Petroleum Exporting Countries. The IEA's endorsement of a crimped supply scenario likely will be interpreted by the cartel as yet another call to pump more oil -- a call it will have a difficult time answering. Last week, the Saudis gave President Bush a lukewarm response to his plea for more oil, saying they were already adding 300,000 barrels a day to the market, an announcement that did nothing to cool prices. At the same time, the IEA's conclusions likely will be seized on by advocates of expanded drilling in prohibited areas like the U.S. outer continental shelf or the Alaska National Wildlife Refuge.
L.A. not ready for quake: OK, we're running out of oil - what next? Well, not to get everybody nervous, but a new report concludes that an earthquake similar in scope to the one in China would cause about 2,000 deaths in Socal and $200 billion in damage. The report by the U.S. Geological Survey and the California Geological Survey predicts that major freeways and rail lines would be severed by a 7.8-magnitude earthquake along the San Andreas fault. From the LAT:
The temblor would disrupt the movement of goods to and from major ports; manufacturing plants would halt production and face additional costs to transport goods out of the region; and hundreds of older commercial office buildings would crumble. "Businesses forced to close have a domino effect," the report says, "and as the chances diminish for regaining jobs or finding new ones, more and more people are struggling to rebuild their lives." The report predicts that financial institutions would face a growing number of loans in default as businesses collapsed and individuals gave up on recouping their losses. Competition for building materials and construction crews would be fierce. Widespread fires caused by the quake and disruption of water, power and gas supplies would add to the economic toll.
L.A. Lunchbox company fined: T-A Creations has been ordered to pay $10-million for selling 100,000 lead-tainted lunchboxes. The judgment issued in SF Superior Court is among the largest since voters approved Proposition 65, which requires the posting of public warnings in businesses or on products that could expose people to potentially dangerous chemicals. From the LAT:
The lunchboxes proved embarrassing to the California Department of Public Health, which purchased the products to give away at fairs promoting healthful living, including eating fresh fruit and vegetables. In September, public health authorities recalled 300,000 green and blue canvas lunchboxes the department had distributed throughout the state since 2004. A spot check by a Sacramento County lab found lead levels in some boxes "significantly above" the state's legal limit of 600 parts per million.
Sony's Hot Ticket: The studio is starting up a new unit to distribute concerts, sports and other non-movie content to theaters nationwide. Among the events already planned: the final staging of Cirque du Soleil's "Delirium" and the conclusion of the 12-year Broadway run of the musical "Rent." (Variety)