In Commodity News 02/07/2016
Commodity prices surged this quarter by the most in over five years, driven by rallies in oil, sugar and gold, as supplies become tighter in many sectors and investors warm to an asset class shunned for years.
The strong gains have occurred despite the uncertainty surrounding last week’s vote by the UK to exit the European Union.
“We do not anticipate that Brexit itself will derail the structural supply/demand-led rebound in commodity prices heading into 2017,” analyst Aakash Doshi at Citi said in a note this week.
The bellwether Thomson Reuters/Core Commodity CRB Index that tracks 19 major commodities has gained 13 percent during the second quarter, the strongest percentage gain since the fourth quarter of 2010.
Crude oil was one of the strongest performers, climbing by about 25 percent this quarter.
U.S. and North Sea Brent grades have bounced back from 12-year lows hit earlier this year, supported by expectations that a glut that has been weighing on prices since 2014 would start to ease, reduced by unexpected drops in output.
However, Brent fell by about 2 percent on Thursday, pressured by a return in Nigerian and Canadian output.
Gold has been another outperformer, gaining 7 percent this quarter and touching a two-year high last week, after last week’s Brexit vote sent investors scrambling for protection in “safe haven” assets.
Spot gold, little changed on Thursday, was also on track for its biggest monthly gain since February.
“In the medium term, gold is going to be supported by the unlikelihood that the Fed will raise rates in the next couple of months,” Mitsubishi Corp Jonathan Butler said this week.
The sugar market has soared recently, underpinned by a shift into a global deficit after years of surpluses.
Raw sugar futures were on track for a rise of almost 40 percent in the second quarter, the strongest since 2010.
The futures edged up on Thursday to the highest in more than 3-1/2 years on fund and chart-based buying as the end of the second quarter neared and the currency in top grower Brazil fluctuated near an 11-month peak.
Among industrial metals, zinc marched to the highest in a year on Thursday, fuelled by expectations of tight markets and potential shortages.
So far this quarter zinc has gained more than 15 percent, its best performance since the third quarter of 2010, taking this year’s gains to 30 percent.
Source: Reuters (Additional reporting by Jan Harvey, Pratima Desai, David Brough and Devika Krishna Kumar; Editing by Greg Mahlich)
