The Daily Prophet: If You’re Long Commodities, Our Condolences – by Robert Burgess (Bloomberg News – May 4, 2017)

Connecting the dots in global markets.

It would be an understatement to say it was an ugly day for anything related to commodities. The Bloomberg Commodities Index tumbled 1.82 percent, its biggest drop since November. Energy markets, agriculture-related raw goods such as wheat and cattle, and metals such as copper, nickel and the iron ore used to make steel were all hit hard.

Even gold dived. Economists like to say commodities are not the referendum on the global economy they once were, but it’s hard not to notice how closely the recent weakness tracks the drop in the Citi Economic Surprise Index, which measures the data that exceed forecasts relative to those that miss, to its lowest level since the start of the year.

The oil rally following OPEC’s deal to curb supply has disappeared. Futures on both sides of the Atlantic dropped to their lowest since late November on growing signs that the group’s production cuts are failing to clear a surplus of crude, according to Bloomberg News’ Mark Shenk. Oil stocks felt the pinch, with the S&P Oil & Gas Exploration and Production Index slumping as much as 4.9 percent Thursday to the lowest since August.

“Evidence is mounting that the OPEC agreement, and the market’s reaction, were much ado about nothing,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. U.S. crude output has risen to the highest since August 2015 as shale drillers add rigs every week.

In response, OPEC is likely to extend the 1.2 million barrel-a-day cut agreed to in November for six months, according to Nigerian Oil Minister Emmanuel Ibe Kachikwu. OPEC will meet May 25 in Vienna to make a decision. Russia is said to support prolonging the curbs, according to a government official.

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