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Commodity fallout

Published Wednesday, August 5th, 2015

On Monday the Thomson Reuters CRB Core Commodity Index closed below 200 for the first time since June 2003. It managed to claw its way to marginally above 200 at last night’s close. The index reached a high of 473.97 in July 2008 and ended last year at 229.26. Any investor tracking the index over the last four-and-a-half-years has had a rough ride. The last year the index registered an annual gain was in 2010. Last year it fell 18% and the fall this year to date is 13%.

The fall in commodity prices is turning from being a welcome relief to manufacturers and consumers to becoming a major drag on global growth. In 2014 energy, chemicals and mining companies accounted for one-third of global capital expenditure. Announcements of project cancellations and deferments in response to the price collapse will result in a 20% fall in capital investment this year and the next according to S&P.

Brent failed to close above $50 bbl for a second consecutive day missing it by a whisker at $49.99 (+47). It pushed up to $50.45 at one point but encountered selling. WTI closed +57cts/bbl at $45.74 bbl. Adding to crude oil pessimism are fears that refinery runs will have to be cut in response to record high product stocks held in independent storage in the ARA area.

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Posted by David Hufton