MELBOURNE AUSTRALIA 18 January 2007 – “Commodities – Investors losing appetite for oil, copper.” What a headline. That was courtesy of Reuters. We also heard something similar from CNBC yesterday morning.
The gist of the story on CNBC was that crude oil had fallen by 17% this year – ie. From the 1st January. Reuters quoted futures market analyst Tetsu Emori from Mitsui Bussan who said, “The market is quite nervous about taking positions after seeing so many days of sharp drops in oil prices. Many are getting out of the market and cutting their losses.”
In an interview with Alan Kohler, Commonwealth Bank commodity strategist Tobin Gorey said about oil, “It’s got some momentum downwards and there’s not a lot of news to turn it around.” He points out that all the worst-case scenarios that were factored into the oil price just didn’t happen, he went on, “I guess the run of luck for the market continues there. There was no conflagration in Iran last year. There was no untoward weather and we started this northern winter with inventory that was OK.”
As far as Gorey is concerned the GoldmanSachs ‘superspike’ argument has been thrown out the window – for now, pointing out that the $100 plus price target really did – in the near term anyway – depend on a series of unfortunate events happening. Plenty of unfortunate events have happened in the middle east during the last twelve months, but none of them have had a serious impact on oil prices.
What about metals? Reuters quotes HSBC analyst James Steel as saying, “In our view, the investor interest that (oil and copper) attracted now appears to be deserting the markets.” He went on, “Emerging markets have also lost some ground recently, and we believe their fate has been tied to gold and commodities for the last 18 months or so. It is also possible that the enthusiasm for risky investments may be waning.”
But while oil is down seventeen percent and copper is down by twelve percent since the start of the year, there is at least one metal that has pretty much held its own. No prizes for guessing that it’s GOLD.