Hedge fund interest in commodities 'growing'
By: Kevin Morrison
October 3, 2006 - The Financial Times
Energy and metal prices have had a significant correction since they reached their record or long-term peaks earlier this year but talk of a prolonged downturn may be premature.
Barclays Capital said the 53-month upward trend in the Goldman Sachs Commodity Index had been broken, as institutional investor inflows into commodity product indices slowed. But it said hedge fund activity in commodities was still growing, as was private investor interest.
The fall in the oil price below $60 a barrel this week prompted talk that oil could be heading for the mid-$50s. Such gossip was enough to spur some ministers of the Organisation of the Petroleum Exporting Countries into action to bolster the sagging, but still relatively high, oil price.
Nigeria and Venezuela said on Friday that they would cut oil output by up to 170,000 barrels a day from Saturday, equivalent to about seven per cent of Opec's estimated production.
While other Opec members said they would not formally cut output, they have been quietly lowering production this year.
Saudi Arabia is estimated to have produced an average of about 9.1m b/d in September, down about 200,000 b/d from its August output, and about 400,000 b/d lower than the same period last year.
The announcement by Nigeria and Venezuela had little effect on prices as traders had factored in a cut, after comments by Edmund Daukoru, Nigeria's energy minister and Opec president, that Nigeria would look to trim output.
ICE Brent crude futures for November delivery slipped 6 cents to $62.48 a barrel by the close.
Brent touched a six-month low of $59.32 during the week, and is down more than 20 per cent from its recent peak of $78.65, having suffered its biggest price fall for 15 years in the quarter.
November West Texas Intermediate fell 96 cents to $61.80 a barrel in morning trade on the New York Mercantile Exchange, but settled 15 cents up on the day at $62.91 a barrel. During the week it touched a six-month low of $59.52.
Traders said the move by Opec was a sign that it did not want oil prices to fall below $60 a barrel.
Petroleum product prices have also had a poor quarter, with Nymex gasoline futures down by a third on the quarter to $1.4750 a gallon, and US heating oil futures 17 per cent lower at $1.6675 a gallon.
US natural gas futures are down 36 per cent from the beginning of August, but only nine per cent on the quarter.
Metal prices had a strong first half to the year when copper and zinc struck record highs and aluminium a 10-year high.
Nickel left its record breaking run until August when it touched a record high of $30,300 a tonne on the London Metal Exchange.
Since reaching their peaks, industrial metal prices have drifted down, but dwindling stockpiles, strike action and firm demand have provided support.
Copper prices rose $85 to $7,555 a tonne on the LME on Friday, and are up about $100 on the quarter, although 14 per cent down from their May peak of $8,790.
Nickel dropped $100 to $28,900 a tonne on the LME on Friday, but is up 33 per cent on the quarter.
Gold has also drifted during the latest quarter, ending $8 lower at $596.05/$597.05 a troy ounce in London on Friday, down $20 on the quarter and more than 18 per cent off its 26-year peak.
Some of the best performances in commodities over the past quarter have been in agricultural commodities, known as softs.
The soft red winter wheat futures for December delivery on the Chicago Board of Trade struck a 10-year high of $4.53 a bushel on Friday as traders digested the prospect of lower production and shrinking global stockpiles.
CBOT wheat futures are up 16 per cent on the quarter.
In Paris, European milling wheat futures hit €149.25 a tonne on Friday, the highest level since March 2004.
Copyright The Financial Times Limited 2006 |
