Foreword
So, it is with very mixed feelings that I have decided to leave. I may just spend a lot of money, go for a lot of lunches and get very bored, very quickly. But this business, like yours, is all about risk. In the meantime, I leave you in the capable hands of my Publisher and his team, since this will be my last issue of Commodities Now. Of course, if anyone feels overwhelmed with the desire to send expensive leaving gifts, for God's sake don't let professional ethics deter you.
By Charlotte James, Sales & Production Director.

Commodities Zenith: Too Far, Too Soon ...?
Investment funds have 'troughed' on commodity markets in the last two years. Many more are entering the sector (or rumoured to be), even in the knowledge that prices have rocketed to perhaps beyond reasonable levels. So have investors 'pigged out' on commodities?
By Guy Isherwood, Editor.

Funds & Commodities
Hedge funds are playing an increasing role in markets worldwide, including commodity markets and energy in particular. Largely unregulated, many are considerably less transparent than other investment vehicles. In this article, we explore some of the key risk management issues related to hedge funds, both from the point of view of the hedge fund managers as well as investors in those funds.
By Carlos Blanco & José Ramón Aragonés.

Oil Titans
Henry Ford may have wanted his 'Model T' to run on ethanol but it was oil that defined the development of the world's energy sector in the 20th century and the energy resource that we will run out of in the 21st. In the meantime, very soon 90% of the world's oil reserves will be held by National Oil Companies (NOCs) which have developed as a consequence of the 'resource nationalism' that swept through Latin America, the Middle East and then to Africa following the collapse of colonialism. Yet there has been little interest in studying the behaviour and motives of NOCs (especially in Arabic) or, indeed, why NOCs exist in the first place.
Book Review, Commodities Now.

Energy City Qatar
The Middle East's first Energy Business Centre intends to become the 'Houston' or 'Calgary' of the Middle East.
Review, Commodities Now.

Energy Security Paradigm
The world's energy producers, consumers and policy-makers must urgently consider how the traditional oil-and-OPEC-based energy security approach of the 1970s can evolve to meet new realities and long-term needs, the World Economic Forum and Cambridge Energy Research Associates (CERA) write in The New Energy Security Paradigm. The report is being used as an agenda-setting outline for meetings of the World Economic Forum's Energy Industry Partnership in coming months.
Review, Commodities Now.

Oil Sands: A Short-Term Solution to Middle East Oil Dependence?
In an increasingly uncertain US energy environment, one of the most attractive means to increase crude production from secure supply sources is the further development of the Canadian oil sands industry, primarily located in the Province of Alberta in western Canada.
By Timothy Douek & Alan Herbst, Utilis Energy.

Exchange Renaissance
The past five years have been good to commodity exchanges, with trading volumes and the number of new participants increasing. Jeremy Wilcox looks at the renaissance in exchange fortunes and the opportunities and challenges that lie ahead.
By Jeremy Wilcox .

EU ETS: After the Fall
The EU allowance market crash has sent shock waves through the global emissions marketplace. The story is not yet over, with more - but not all - 2005 emissions data now out. What does it mean for the long-term prospects of the market?
By Andreas Arvanitakis, Point Carbon.

Copper: Confounding Reason?
The explosion in copper prices that has continued this year has left many confused, and some no doubt poorer. Base metal specialists Bloomsbury Minerals Economics (BME) investigate if, and when, 'normality' can be returned to the sector. This copper story comes in five parts. The First is a brief review of the physical market, in which the consensus of the copper industry and the analytical community is for surplus in 2006-07. However, BME expects a continuing deficit market. Second comes the other aspect of demand: long-only investment buying, in three main forms, traditional rather rigid commodity index funds, modern more flexible (and often more copper-intensive) forms, and finally structured notes where ownership is of a call option. Combined, these represent rights to own more than three quarters of a million tonnes of copper which does not yet exist. The third subject is interaction of the physical market and long-only investment demand in price determination - something which only BME has so far quantified. The fourth topic is a re-appraisal of how long-term equilibrium might be reached in a market which is now hybrid: part old industrial raw material market and part new financial instrument. BME's conclusion is that equilibrium will not be regained until around 2012 by which time stocks may be adequate to cover both forms of demand. Fifth is a review of the implications for the copper industry and for investors.
By Peter Hollands & Leon Westgate from BME's Copper Team, plus Adam Sotowicz & Mire Zloh of BME's Price Modelling Team.

Many Happy Returns: To LME's Plastics Contracts
James Yong, Head of Plastics at Ring Dealing Member Natexis Commodity Markets, suggests that there is plenty of reason for optimism as the London Metal Exchange plastics contracts celebrate their first anniversary.
By James Yong, Ring Dealing Member Natexis Commodity Markets.

PGMs: Platinum Strength Continues: Palladium Fundamentals Remain Muted
Platinum group metals have performed robustly and will continue to do so. Notwithstanding extra supply from South Africa, this particular group of precious assets looks set to continue to deliver - to investors and consumers.
By Guy Isherwood, Editor.

Structural Sources of Return & Risk In Commodity Futures Investments
This article provides a 'nuanced' view of commodity futures investing. We discuss how commodity returns have, in the past, mainly relied on portfolio effects and term-structure properties of individual commodity futures contracts. But we also note that rare trend shifts - as occurred in the early 1970s - can also be a meaningful source of returns for a commodity investor. We further discuss some of the dynamic correlation properties of active commodity investing. These properties are also quite 'nuanced'. Finally, we examine the prospects for the main constituent of the dominant commodity index - oil - and provide a framework for understanding what could potentially drive future returns.
By Hilary Till, Premia Capital Management, LLC.

Control Systems Cyber Security: Improving the Security Profile of Crucial
National Infrastructure
Utilities form part of what is commonly termed as Critical National Infrastructure. But minimal consideration has historically been given to the risk of damage, disruption or interruption to the operation of these systems by electronic manipulation (i.e., their cyber security risk).
By Marc Tritschler & Joe Weiss, Kema Limited.

Information Systems: For Small & Medium Trading Businesses
Small and medium sized enterprises (SMEs) play a very important role in energy and commodity industries. The author suggests the key information system requirements for such enterprises and presents a solution approach.
By Atul Agrawal, Infosys Technologies.