Commodity Returns Fall to Lowest Since at Least 1991 on Oil Rout – by Agnieszka De Sousa and Eddie Van Der Walt (Bloomberg News – July 12, 2016)

A gauge of returns on raw materials tumbled to the lowest since at least 1991, extending the agony that producers of energy, industrial metals and agricultural commodities faced in 2015.

The Bloomberg Commodity Index, a measure of returns from 22 raw materials, fell as much as 1.5 percent to 74.02 on Tuesday. A roundup of the bearish numbers: Crude oil in New York dipped below $30 a barrel, copper fell to less than $2 a pound and natural gas as low as $2.24 per million British thermal units.

The expansion of the global economy has faltered, supplies of everything from oil to copper to grains are ample and a stronger dollar has eroded the appeal of raw materials as alternative investments.

Recent market turmoil in China further added to concerns that consumption in the biggest commodities buyer will slow. The rout is hurting producers including Freeport-McMoRan Inc., Glencore Plc and Anglo American Plc, who invested in boosting output following a decade-long super cycle.

“I’ve sort of given up trying to call bottom,” said Fiona Boal, a London-based director of commodity research at Fulcrum Asset Management, which oversees $3.7 billion. “Commodities have a finite value, they serve a purpose. You need copper, you need oil, you need corn. You should always be able to view where the marginal value is. By all measures, we are getting closer to that.”

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