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10/4/11

The Vampire Squid's new commods calls

Goldman Sachs (GS) has a new commodities report out this morning, Sept 4th, and your humble scribe got his grubby hands on a copy. Here are the six individual trading recommendations mentioned in the note:

Long ICE Brent December 2012 contracts (initial price $105.16/bbl, current loss $8.14/bbl)
We recommend a long position in the ICE Brent December 2012 contract, as we expect that the market will continue to tighten to critical levels by 2012, pushing oil prices substantially higher to restrain demand.

Long UK NBP Q4 2012 ICE Natural Gas contracts (initial price 70.8 p/th, current gain 0.3 p/th)
We continue to recommend a long position in UK NBP Q4 2012 contracts as we expect UK NBP prices well above the current forward curve in 2H2012. Our view is mainly driven by our constructive oil price forecasts implying higher oil-indexed natural gas prices than what the market current expects. This would imply an arbitrage between UK NBP and oilindexed gas at higher price levels than what is currently embedded in the market.

Long Copper: Buy June 2012 LME copper (initial price $8,804/mt, current loss $1753/mt)
Although we have reduced our 12-mo copper price target to $9500/mt from $11000/mt as Goldman Sachs economists have reduced global economic growth forecasts, our downwardly revised copper price forecast still suggests substantial upside from current depressed levels. We caution that sentiment regarding the economic outlook and the European sovereign debt problems are likely to remain poor in the near term, presenting further downside risk to prices as well as our forecasts. However, we also note that the speed and magnitude of the copper sell-off suggests an accumulating short position in the market. Further, a potentially powerful upside catalyst lies ahead in China should policymakers shift to an easier stance and/or should lower prices entice Chinese buyers back into the market. Thus, given the mainline expectation of still lackluster but substantially positive global economic growth, we continue to recommend long positions in copper.

Long Zinc: Buy December 2012 LME zinc (initial price $2,189/mt, current loss $256/mt)
Although we have lowered our 12-mo zinc price target to $2400/mt from $2700/mt as Goldman Sachs economists have reduced global economic growth forecasts, our downwardly revised zinc price forecast still suggests substantial upside from current depressed levels. We caution that sentiment regarding the economic outlook and the European sovereign debt problems is likely to remain poor in the near term, presenting further downside risk to prices as well as our forecasts. However, zinc prices are currently low enough to motivate reduced production in coming months. Medium-term, we continue to expect zinc to become more supply-constrained owing to growing demand from China as well as important mine closures that are set to take place in 2013-15. Thus, given the mainline expectation of still lackluster but substantially positive global economic growth, we continue to recommend long positions in zinc.

Long Gold: Buy December 2011 COMEX Gold (initial value of $1,364.2/toz, current gain $258.1/toz) 
We expect gold prices to continue to climb in 2011 and 2012 given the current low level of US real interest rates.

Long soybeans: Buy November 2011 CBOT soybean call options (initial value of $11.60/bu, current gain $1.69/bu)
Our price forecast does not suggest upside potential to our outstanding long soybean trade recommendation. However, we had locked in potential gains in early August by rolling the long Nov-11 CBOT future position initiated in November 2010 into a long Nov-11 soybean $14.00/bu call position and we recommend keeping this position open in case of a supply disappointment in South America should the La Nina weather condition intensify.

IKN back. So there you go, all you have to do now is decide whether the GS scumballs are fading their own clients and shorting these reco'd long positions in secret. After all, it wouldn't be the first time, would it?