A Fresh New Month A New Beginning For Commodities
August 3, 2015
Commodities headed for the biggest monthly decline in almost four years on concern that supplies are rising as demand slows, sending copper to a six-year low and oil into a bear market.
The Bloomberg Commodity Index has retreated 10% in July, the most since September 2011, after sinking to a 13-year low this week. The prospect of higher borrowing costs in the US strengthened the dollar and drove gold to the lowest in five years. Brent crude’s third month of losses has fuelled more cost cuts by the biggest producers including Royal Dutch Shell and BP Plc. Crops from wheat to corn and soybeans are set for their worst monthly performance this year.
Commodities are falling out of favor with investors as demand in China, the biggest user of everything from metals to energy, is faltering amid expanding inventories of copper and oil. The Federal Reserve is moving closer toward raising rates, boosting the dollar and curbing the appeal of raw materials as they become more expensive for holders of other currencies.
Oil prices fell on Friday, with U.S. crude set to post the largest monthly drop since the 2008 financial crisis, after signs that top producers in the Middle East were continuing to pump at record levels despite a growing global gut.
Uncertainty ahead of key U.S. oil production and rig count data due later in the day also weighed on oil despite a weaker dollar on Friday that normally would be supportive to commodities. That aside, heavy hedging activity in gasoline and diesel futures ahead of front-month contract expiry dominated play on the petroleum complex, diverting attention from crude futures.
Futures of global benchmark Brent and U.S. crude oil were down more than 1 percent each on the day. Brent was down almost 4 percent on the week, declining for a fifth week in a row.
Through July, U.S. crude was down 20 percent, its largest monthly decline since October 2008, when oil had an epic collapse at the outbreak of the financial crisis.