Morning Mumble: Oil the support...and a late night Cocoa or Coffee & a telling off for certain holders.

Good Morning, Coffee! Well cheaper coffee!

Nearly 1 month ago, EMC - Morning Mumble: China Data yet again contradicting those overly bullish analysts & shorters heaven! Certainly the Christmas Cheer! See: Brent support...With Brent Crude trading at $51.33/bbl the wiser folks will be reducing shorts or hedging as the odds of greater or severe drops has been reduced but is far from disappeared.  

Yesterday the EU reported the drop in consumer prices that has only gone to assist the negative outlook (Bloomberg: consumer prices). The consequence being that it has improved the likelihood of the oil price staying lower for longer and limit the potential of a recovery above $64/bbl (Brent) (approx. and under review). Over to the EU for the stimulus.

The speculators (long) are aware of risks with a short-term drop in Brent yesterday below $51/bbl to $49.66/bbl indicating there's a good chance of another step-down, especially if speculators absent themselves. Over to OPEC and the rebel components to force an emergency meeting to cut production if anything near $43.20/bbls is seen. One could almost place a Star Wars theme to the story and we would be wise to keep a close eye on ICE Futures Europe (MarketWatch Article) for a new lows in futures.

Any positive movement circa $3.50-$6/bbl (pending who you read) in futures will create speculation within shipping, the higher figure being required due to charter rates being significantly higher. One would be very surprised if ultra-slow steaming is introduced a la 2009, save for some Chinese influence. The Chinese seem willing to bail out higher cost South American countries rather than see supply reduced Chinese, Venezuelan presidents vow enhanced financing cooperation (Xinhua Net)

Will ignore the fact that ICE Futures Europe are to start cocoa contracts in Euros from April and save it for another day. One hopes United Cacao (CHOC) will be aided by this seeing as prices have fallen to the lows of 2010. With chocolatiers (term used loosely for some companies mentioning no names) committed to higher prices, could Cocoa have the glut that Oil is seeing today in 12 months? Buyers are totally absent from immediate physical markets (cash). Price increases will obviously have to adjust to demand, thus the consumer being the price dictator will dictate the supply chain. Amazingly similar to coffee, with a drop in prices 24-27% pending supply. Who'd have thought it...see my commentary on FTML in October 2014 for more detail on coffee.

With food pricing becoming more transparent globally, one envisages consistent pricing with greater speculation during periods of uncertainty. This has not been the case, as evidenced by the spike in coffee last year, which was unfounded (the short). We have Tesco's informing us of their trading update and plan of action. plus flogging Blinkbox and their Broadband Customers to TalkTalk. Goodbye Divi...but its a lot better than the market thought! Later perhaps get some response from Duncan as he's been on the ball so far!

As a side thought to TalkTalk, do parties join up to Tesco on price or because they don't want to be part of another network. One suspects customer loyalty was the primary focus...good luck with the margins there, albeit it would be interesting to see the acquisition costs

Caledonia Mining (CMCL) 2014 Production Update and 2015 Production Outlook does not bode well for the recovering SP with grade declines a poignant reminder of the issues facing miners on a day to day basis. Its disappointing the lack of commentary on how the recent oil price drops have impacted on CMCL energy costs and all in costs. The un-interruptible power supply agreement must be under review in light of diesel costs coming down in Zimbabwe. Is it time to review their needs and consider the stand-by generation costs once again seeing as they're paying a hefty premium for assured supply which still has interruptions (albeit the company perceive these as acceptable.) Hope/Jam placed on the revised investment plan. It will be very surprising if CMCL hit the same production as the year just gone...

Kenmare Resources (KMR) decide today's update should be related to the share price which is exactly where it should be in light of the risks associated with refinancing and Iluka Resources determined and demand approach to their Due Diligence. One can only assume Iluka Resources will know beyond doubt if KMR is for them. With a significant amount of leverage again Creditors (ransom), Iluka may just be able to structure the deal so all KMR holders debt or equity take a hair cut in the process. Not one for those whom like premium bond style investing.

The words "potential default" should not be ignored in this RNS nor should the returns to shareholders when compared to associated board costs and remuneration. Clearly I should consider another career...perhaps at the Pru? If certain parties are reading, they'll be wise to think about my thoughts once again about KMR. Forget told you so, parties would be wise to consider what justification there was in holding the stock with the outlook, the debt and management. You have been told.

Some cheer for Victoria Oil & Gas (VOG) whom are now in receipt of the $6.4m balance of $10.1m Cash Call Received from RSM. However there's gossip that as a result of Oil declining significantly certain parties wish to revisit their pricing contracts. Perhaps VOG will update the market on this if it's correct or clarify where possible the contract terms. Obviously there's more to the price than just oil, security of supply, economic and environmental benefits, however at the end of the dead, one is always wise to consider there bottom line (the client). The risk is common-sense and should not just be ignored as unlikely...

Now as a frequent traveller on trains the intention of thetrainline.com (I'm refusing to link) the RNS cannot be ignored. The deal with ATOC is viable, however one cannot help but wonder the replication of the APP and business now the value has been placed on the IPO. Those die hard IPO's of IT will be obviously queuing up, the shorts would be wise to wait post the steam and puff.

With rumours bouncing around regarding Circle Oil (COP), the director changes cannot go without a mention over the past two days, with the appointment of Susan Prior as Group Finance Director and the appointment of Mssrs Antony Maris and David MacFarlane as Non-Executive Directors of the Company. Next door to Gulfsands (GPX) whom are not without issues above and beyond the current global pricing crisis for the minnows, could we be seeing some more consolidation? With casualties starting to come thick and fast, Europa Oil & Gas (EOG) states the obvious today with an update. In the absence of any improvement in oil futures above circa 20% one has to question why you would hold any tiddler stocks save for higher risk take-out speculation nevermind the debt issues of certain companies!

With an unsurprising setback in Sirius Minerals (SXX) application process things bobble along without too many issues. Phosphate prices will be further under pressure due to declines in food prices this will only benefit SXX's marketing approach and offtake agreement process.

Atb Fraser  

Proof-reading no doubt required.