Thursday 05 October 2023

CREDIT SUISSE – December sees further consolidation in commodity markets

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NEW YORK, US – Commodities were lower in December, largely characterized by fundamental factors, according to Credit Suisse Asset Management

The Bloomberg Commodity Index Total Return performance was negative for the month, with 16 out of 22 Index constituents trading lower.

Credit Suisse Asset Management observed the following:

  • Energy was the worst performing sector, down 22.06%, led lower by Natural Gas. Crude oil and petroleum products also declined due to increasing production amid expectations for weaker oil demand growth.
  • Livestock declined 4.84%, led lower by Lean Hogs, as cheaper feed costs allowed farmers to achieve heavier hog weights, which increased pork supply expectations throughout the period.
  • Industrial Metals ended the period 4.34% lower. Weak economic data out of China, including lower-than-expected Industrial Production data for November, heightened demand concerns for base metals.
  • Agriculture decreased 1.92%, led lower by Coffee, as expectations of sufficient rainfall in Brazil’s key growing regions continued to ease the supply concerns caused by a severe drought earlier in the year.
  • Precious Metals increased slightly, up 0.63%. While Gold led the sector higher, Silver also increased slightly amid speculation that China will increase its stimulus measures to help boost its economy, increasing the appeal of Precious Metals.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management said: “The end of 2014 continued to be characterized by fundamental factors driving commodity returns. Supply surpluses, particularly in the Energy sector, became the most prominent theme as crude oil prices fell sharply.

While lower oil prices may be fueling consumer confidence and retail spending in most economies, some North American oil producers have begun to feel the effects of falling prices.

On a grand scale, persistently low oil prices may heighten geopolitical tensions between the winners and losers in this production battle, potentially affecting the supply/demand balance across multiple commodity sectors.”

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, “Geopolitical risks remain elevated due to uncertainty in Russia amid its sharply declining Ruble and lower oil prices, in addition to ongoing conflict in the Middle East.

Meanwhile, continued weak manufacturing data reaffirmed the commitment of China and the ECB to assorted stimulus measures.

Amid these accommodative efforts from major central banks, along with a strengthening US economy, global growth signals may improve and could be supportive of global commodity demand growth in the medium- to long-term.”

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