Latest news with #BloombergCommodityIndex
Mid East Info
4 days ago
- Business
- Mid East Info
COT Report: Speculators sold crude ahead of OPEC hike
Geopolitical and tariff tensions spark strong weekly start for commodities The commodities sector has started the week with strong gains, led by energy and metals—both precious and industrial—in response to heightened geopolitical and tariff tensions. These developments follow a weekend that saw Ukraine launch a spectacular assault on several of Russia's strategic airfields, damaging over 40 aircraft. In addition, tensions between the US and China—the world's largest economies—are rising again, following a weekend during which both countries accused each other of violating a trade deal that was only concluded last month. Prior to these renewed hostilities we have seen a sharp increase in container freight rates, as exporters in China and importers in the US took advantage of the 90-day pause in tariff hikes to frontload shipments ahead of the mid-year peak cargo season. The Bloomberg Commodity Index, which fell 0.6% last month, trades up 1.7% in early Monday trading, with broad gains led by copper, crude oil, and gold. HG copper futures in New York are trading sharply higher after Trump doubled import tariffs on steel and aluminium to 50%, raising speculation that a larger-than-expected tariff could soon be applied to copper. The New York premium over London has risen back above 12%, with supply issues at the world's second-largest mine in Congo also providing additional support—offsetting short-term, trade tension-related demand concerns. A range-bound crude oil market saw prices recover all of last week's losses, surging higher despite a group of eight OPEC+ producers announcing a third consecutive production hike of 0.41 million b/d. This move was made primarily to regain market share from high-cost producers and to penalise persistent cheaters—led by Iraq and, not least, Kazakhstan, which last week stated it was not technically possible to reduce production in order to comply. Instead, the focus has now shifted back to geopolitically related supply concerns, particularly involving Russia, Iran, and Libya, the latter, after its eastern government said it could take precautionary measures, including a force majeure on oil fields, after a rival militia stormed the National Oil Corp headquarters. Gold, which suffered a small 0.6% setback last month, trades up around 2% on the day after receiving fresh safe-haven demand due to the aforementioned tensions. Together with a weaker USD, the yellow metal now trades above USD 3,330 and the downward-trending line from the April record high. In order to attract fresh momentum buying—not least from hedge funds, who recently cut their net long in the COMEX gold future to a 14-month low—a higher high above USD 3,365 is likely needed. Forex The latest reporting week to 27 May offered little in terms of fresh market direction, during a week that saw the S&P 500 suffer a small loss, while the bond yields traded softer by a couple of basis points. However, these relatively calm market conditions did not prevent fresh US dollar selling, which saw the broad-focused Bloomberg Dollar Index touch a 17-month low, while the narrow-focused Dollar Index held within an established range and above the April low. Flows across the eight IMM currency futures tracked in this were relatively muted, with buying of EUR and GBP being partly offset by small selling of the remainder, led by CHF and JPY, overall lifting the gross US dollar short by USD 1 billion to USD 13.3 billion. Key findings from the latest COT reporting week The latest COT report covered a Memorial Day holiday shortened week to 27 May, and it potentially played its part in keeping changes across our universe of 27 major commodities futures to a minimum. Overall, a week that despite a softer dollar saw the Bloomberg Commodities Index trades near unchanged with losses in energy and agriculture being offset by gains across precious and industrial metals. On an individual level, losses were led by crude oil ahead of another bumper OPEC8+ production hike, the third in a row, wheat amid an improved US growing outlook, and not least the softs sector where cocoa, coffee and cotton all suffered steep losses. Gains on the other hand were concentrated in platinum, copper and soybeans. Hedge funds responded to these developments by selling of crude oil ahead of the OPEC8+ production hike, overall lowering the WTI and Brent net long to 226k, which is still within an established range. In metals, the platinum long jumped to 18.7k, a three-month high, while limited action was seen across the others, including gold. The grains sector saw the first week of net buying in six, led by soybeans, while all the softs saw net selling, led by sugar and coffee.
Yahoo
23-05-2025
- Business
- Yahoo
Beyond the Benchmarks: Exploring Diversification Within Commodity Markets
In today's volatile markets, achieving true portfolio diversification means looking beyond traditional asset classes. While indices such as the Bloomberg Commodity Index (BCOM) or the S&P GSCI Index (SPGSCI) offer a convenient and accessible benchmark for commodities exposure, investors can unlock further diversification potential and potentially enhance returns by exploring niche commodity markets that are not represented in the main commodity indices. This article introduces some of the contracts available on our platform that could match this profile. Commodities are widely recognized for their diversification benefits, offering a potential hedge against inflation and often exhibiting low correlations with traditional asset classes. However, many investors focus primarily on broad commodity indices, overlooking the potential for enhanced diversification within specific commodity sectors. Incorporating smaller commodity markets, characterized by reasonable liquidity and distinct supply/demand drivers, can further optimize portfolio diversification and potentially unlock attractive risk-adjusted return opportunities. To illustrate the diversification benefits, let's first examine the historical correlations between BCOM, the S&P 500 Total Return index (representing U.S. equities performance), and a representative fixed income index (here the Bloomberg U.S. Treasury index). As the data demonstrates, the BCOM has exhibited a varying degree of correlation with both the S&P 500 and treasury markets. Correlation with equity markets has been strong at times, but we have also witnessed strong reversals and periods of near zero, or even negative, correlation. This means that when stock prices fall, commodity prices would rise or remain stable, providing a counterbalance to portfolio losses. Similarly, during periods of rising interest rates, which negatively impact bond prices, commodities can offer an alternative source of returns as they are driven by unique supply and demand dynamics, often influenced by global macroeconomic factors, inflation, weather patterns and industry-specific trends. This historical pattern of low correlation underscores the potential diversification benefits of incorporating commodities into a portfolio. By including assets that don't move in lockstep, investors can potentially reduce overall volatility and improve risk-adjusted returns. This is particularly important during periods of market turbulence, when diversification can help mitigate losses and preserve capital. While indices such as BCOM and SPGSCI provide broad commodity market exposure, relying solely on these benchmarks may leave valuable diversification potential untapped. Let's consider a few examples of our listed commodity markets that do not qualify for inclusion in the main commodity indices yet offer diversification potential and a reasonable liquidity profile: Dairy (DC) futures: Dairy prices are driven by a complex interplay of factors, including weather patterns affecting milk production (heat stress can reduce output), feed costs (such as corn and soybeans) and global dairy demand. This unique combination of drivers sets milk apart from other agricultural commodities and offers diversification potential within the agricultural sector. Seasonality also plays a role, with milk production typically higher in spring and lower in fall. Lumber (LBR) futures: Linked to the housing market, lumber prices are influenced by housing starts, renovation activity and commercial construction. These factors are often driven by interest rate policy and general economic conditions, making lumber a useful diversifier within the broader commodity complex as well as a potential leading indicator. There is also a seasonal component to lumber prices, with more construction activity after the winter as the weather improves. HRC Steel (HRC) futures: U.S. domestic HRC steel, essential for construction, manufacturing and automotive industries, provides exposure to a broad range of industrial activity. Its price dynamics are linked to raw material costs (iron ore, coking coal), global economic growth and specific industry trends, such as infrastructure spending and manufacturing output. This makes HRC steel a valuable diversifier, offering exposure to a different set of economic drivers than traditional financial assets. Lithium (LTH) futures: Essential for batteries used in electric vehicles, consumer electronics and grid-scale energy storage, lithium provides exposure to the rapidly growing electric vehicle and renewable energy sectors. Lithium prices are influenced by supply chain dynamics (mining and refining capacity), technological advancements in battery technology and government policies supporting clean energy adoption – Lithium Commodity futures offer exposure to a high-growth sector with distinct drivers. Ethanol (CU) futures: This biofuel's price is tied to corn and sugar prices (the key feedstocks), government regulations (such as blending mandates and subsidies) and gasoline demand. This creates a distinct profile within the energy complex, offering diversification away from traditional fossil fuels. Furthermore, ethanol prices can be influenced by agricultural market conditions and policy changes, adding another layer of diversification potential. Propane (B0) futures: Used for heating, cooking and as a petrochemical feedstock, propane demand is highly sensitive to weather patterns, particularly during winter months. This seasonality offers a diversification angle, as propane prices can fluctuate independently of broader energy market trends. Supply disruptions and inventory levels also play a significant role in propane price dynamics. To demonstrate the potential diversification advantages of incorporating these commodities, the correlation table below showcases historical relationships between these markets, the BCOM and S&P 500 Index. As the table shows, the correlation of these futures with BCOM (representing a diversified commodity exposure) and the S&P 500 is very low across the board. Commodity code Asset Correlation with BCOM Correlation with the S&P 500 DA Dairy 0.085 0.067 LBR Lumber 0.096 0.162 HR HRC steel 0.111 0.069 LTH Lithium 0.069 -0.011 CU Ethanol 0.313 0.005 B0 Propane 0.449 0.100 Source: Bloomberg. Correlation based on daily return correlation over the past 3 years. How accessible are these commodities? Understanding market accessibility and liquidity is crucial for investors. The table below provides average daily volume (ADV) and open interest (OI), both in number of contracts and notional USD value. Notional value refers to the total dollar value of trading activity based on the prevalent price of the commodity. The table also indicates the primary trading method for each contract (screen-based or OTC block). Commodity code Asset ADV OI Trading activity Contracts $m Contracts $m DA Dairy 2,122 74 22,984 801 Screen LBR Lumber 1,234 19 6,623 104 Screen HR HRC steel 1,162 22 37,938 715 Hybrid LTH Lithium 361 3 35,020 321 Blocks CU Ethanol 4,169 308 32,787 2,424 Blocks B0 Propane 10,835 383 158,525 5,608 Blocks Source: CME Group. ADV data for 2024 full year. OI as of April 23, 2025. $m notional value computed based on April 23, 2025, spot month settlement price. Block trades are subject to rule 526. While broad commodity indices (also listed as CME Group futures) offer a solid foundation for portfolio diversification, investors can also choose to look beyond these benchmarks. By incorporating smaller commodity markets, investors can refine their diversification strategies, potentially mitigating portfolio risk and improving overall performance further. These commodity products offer unique exposure to idiosyncratic supply/demand dynamics and can play a valuable role in portfolio diversification efforts. All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience. Derivatives are not suitable for all investors and involve the risk of losing more than the amount originally deposited and any profit you might have made. This communication is not a recommendation or offer to buy, sell or retain any specific investment or service. All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience. CME Group Inc. does not have control over the content, accuracy, quality, or legality, of any third-party product, service, or content advertised on this webpage. The presence of such advertisements on this webpage does not signify any association, partnership, or endorsement of the third-party or its content by CME Group Inc. Full disclaimer Copyright © 2025 CME Group Inc. Sign in to access your portfolio
Mid East Info
18-03-2025
- Business
- Mid East Info
Silver and copper stands out in week of continued energy weakness – Saxo Bank MENA - Middle East Business News and Information
Ole Hansen, Head of Commodity Strategy, Saxo Bank Despite a 1.3% rebound in the Bloomberg Commodity Index, hedge funds continued their third consecutive week of net selling, still reacting to the late-February correction that saw the index drop 4.6% before recovering. The total net long across 27 major futures contracts has declined by 44% during this time after hitting a 2-1/2-year high, led by selling across energy and grains. Energy: The sector's selloff extended to a seventh week, with the net long position down 62% to 224K contracts during this time—half the three-year average. Economic concerns pressured fuel markets, increasing gas oil shorts while NY-traded RBOB gasoline and ULSD diesel positions were cut to near neutral. Gasoline saw fresh short selling (-15.2K), and ULSD experienced long liquidation (-8.7K). Consequently, leaving the RBOB contract mostly exposed to short covering and it partly explains why RBOB is up 3.1% since last Tuesday, while ULSD is unchanged. Metals: Gold remained steady before surging to $3,000 per ounce at week's end, with minimal hedge fund activity seen during the reporting week. Silver (+2.4%) and copper (+4.6%) gains contributed to increased net longs in both. Grains: Corn's 4.2% rally coincided with net selling as hedge funds cut bullish bets, fearing China's counter tariffs would hurt exports. The soybean short position shrank, while wheat remained under pressure despite rotation between Chicago and Kansas contracts. Softs: Sugar's volatility challenged hedge funds, with a 20% rally through February followed by a sharp correction and rebound. Overall, these sharp and sudden price swings saw the net long position fall 47% in a week when sugar gained 3%. Forex: In the forex market, a 2.2% slump in the Dollar Index supported a continued reduction in speculative long dollar positions. Overall, an eighth consecutive week of net USD selling reduced the gross long versus eight IMM futures to a five-month low at USD 5 billion, down from a January USD 35 billion peak just before a number of Trump policy announcements triggered a major and ongoing reversal. Besides continued demand for GBP, which in the past six weeks has seen the net flip from a short to a 29k long, the main driver once again was strong demand for euros, which saw the net flip back to a net long for the first time since October. In the past four weeks alone, speculators bought 77.5k contracts or EUR 9.7 billion. The JPY long, meanwhile, held steady at a record high at 134k contracts or USD 11.4 billion equivalent, while the MXN long reached a three-month high.
Yahoo
13-02-2025
- Business
- Yahoo
US Wholesale Inflation Tops Estimates on Food, Energy Prices
(Bloomberg) -- US wholesale prices rose in January by more than forecast on higher food and energy costs, highlighting only limited progress on inflation ahead of tariffs imposed by the Trump administration. The producer price index for final demand climbed 0.4% from a month earlier following an upwardly revised 0.5% increase in December, according to a Bureau of Labor Statistics report released Thursday. The median forecast in a Bloomberg survey of economists called for a 0.3% gain. Compared with a year ago, the PPI increased 3.5%. Economists pay close attention to the report because several of its components feed into the Federal Reserve's preferred inflation measure — the personal consumption expenditures price index. Those categories were more favorable in January, registering declines in most health care items and in airfares. Stock futures climbed while Treasury yields and the dollar fell after the report. The data on wholesale prices follow a surprising consumer price index report Wednesday that showed underlying inflation at the start of the year was highest since March. The figures sharply reduced odds that Fed policymakers will lower interest rates more than once in 2025, with some economists expecting no rate cuts due to the fallout from higher duties on imported goods. 'The components that feed into the Fed's preferred PCE price measure were, on the whole, very tame,' Paul Ashworth, the chief North America economist at Capital Economics, said in a note. 'Overall, better news than yesterday on price inflation, but core PCE still comes in well above the 2% target.' Fed Chair Jerome Powell told lawmakers this week that inflation expectations 'appear to remain well-anchored' and central bankers have scope to be patient with rate adjustments. Still, President Donald Trump's policy proposals, including tariffs, have introduced some uncertainty to the economic outlook. The PPI report showed a 1.1% increase in food prices, including a 44% jump in egg prices from a month earlier amid an ongoing influenza outbreak among US poultry flocks. Energy prices rose 1.7%. Excluding food and energy, the PPI climbed 0.3%, and 3.6% from January of last year. Overall goods prices increased 0.6%, marking a third straight month of outsize advances. The cost of goods excluding food and energy was up a more modest 0.1% for a second month. Prices of commodities more generally have been marching higher this year. The Bloomberg Commodity Index is near its highest level since May, in part reflecting higher prices for metals, corn and coffee. Meanwhile, the PPI report showed services prices rose 0.3%. The BLS said a third of the increase was accounted for by a surge in the cost of traveler accommodation services. Portfolio management services costs, a category that feeds into the PCE index and largely tracks movements in the stock market, rose for a second month. A separate report released Thursday by the Labor Department showed initial applications for US unemployment benefits declined last week by 7,000 to 213,000. Continuing claims, a proxy for the number of people receiving benefits, declined to 1.85 million in the week ended Feb. 1. --With assistance from Mark Niquette. (Updates with chart.) More stories like this are available on ©2025 Bloomberg L.P. Sign in to access your portfolio
Bloomberg
04-02-2025
- Business
- Bloomberg
Ceilings in 2025? $80 oil, $4 natural gas, $4.50 copper, $5 corn
Hedge funds defy Trump in commodities, elevating sell-stop risks Some combination of WTI crude oil staying above $80 a barrel, $4 per million British thermal unit natural gas, $4.50-a-pound copper and $5 corn may be needed for broad commodities to add to January's bounce. Managed money (hedge fund) net longs jumped in January along with futures open interest, indicating upside enthusiasm — and sell-stop risks. New year commodity exuberance may face price ceilings Are commodities breaking out higher or at elevated autocorrelation risk? This is a key question at the end of January, and our bias is the latter. Open interest in futures tracked by the Bloomberg Commodity Index has jumped about 8% in 2025, which is normal for the first month and indicates new longs, but speculator longs have risen more. At about 9% of open interest as of the latest data, hedge funds are the most bullish since 2Q23. Absent a supply shock, we see downward leanings, particularly if President Donald Trump gets his way in energy. WTI crude may have peaked around $80 a barrel, natural gas just above $4 per MMBtu, copper at about $4.50 a pound and corn approaching $5 a bushel. Macroeconomic prerequisites for rising commodities may include a higher US stock market, Bitcoin, weaker dollar and stronger China. Deflating bond yields counter commodity inflation Falling government bond yields are inconsistent with rising commodity prices. The downtrend in global yields, especially facing potential US tariffs, may place an inordinate burden on stocks and Bitcoin to keep rising to avoid deflation reciprocal to recent inflation. At about 120 bps less than the US Treasury 10-year, the average yields of the top five governments by GDP point to deteriorating demand-pull forces. Is the almost-5% January bounce in the Bloomberg Commodity Index suggesting reflation and higher bond yields, or is it a feint? Our hunch is the latter, notably if WTI crude oil has peaked around $80 a barrel. The graphic shows a reason for crude to breach cliff's-edge support at about $68 — plunging bond yields, led by China. Similar peak inklings in natural gas, copper and corn may portend an ebbing tide. What of commodities if stocks, Bitcoin decline? President Trump's shift to cryptocurrency enthusiast may put Bitcoin in the forefront of markets that need to keep going up in 2025 to avoid deflation, notably from China. That's emphasized by our annual performance scorecard showing the highly speculative and volatile digital asset stretched on the top and Bloomberg US Treasury 20+ index near the bottom, which may portend reversion potential. Lower energy prices and interest rates are stated goals of the president, which may solidify ceilings at about $80 a barrel crude and $4 per MMBtu natural gas. What's notable is gold's 37% gain year over year to Jan. 30 vs. only 25% for the S&P 500 total return. The metal beating stocks is not a good sign for global economic underpinnings. If Bitcoin backs up, it could buttress the old guard store of value. Gold may be gaining momentum, footings in 2025 The least-elastic precious metals on the top of our annual performance scorecard, and highly autocorrelated grains on the bottom, could have trend continuation inklings in 2025. Gold's roughly 55% gain vs. crude oil's almost 20% decline since the leaders of China and Russia announced their 'unlimited friendship' in February 2022 may emphasize geopolitical tensions favoring the precious metal. Absent President Xi Jinping shifting away from President Vladimir Putin and toward Donald Trump, we see gold continuing to rise, especially if the stock market and/or Bitcoin decline. Without a poor growing season, the grains may do what's normal and gravitate toward break-even costs, which for corn is about $3.75 a bushel. Industrial metals are vulnerable to China in decline as indicated by its plunging bond yields.
