Aug. 13 (Bloomberg) -- Commodity supplies may be curbed as mining and energy companies reduce investments because of a global credit crunch caused by U.S. subprime mortgage defaults, Lehman Brothers Holdings Inc. said.

If the global economy weakens because of rising borrowing costs, companies will need commodity price increases to justify spending on expanding production capacity, Lehman analysts Edward Morse, Adam Robinson and Michael Waldron wrote in an Aug. 10 report.

The Morgan Stanley Capital International World Index, a global stock market benchmark, has fallen 6 percent since peaking on July 16. The benchmark Standard & Poor's Goldman Sachs Commodity Index has dropped 2.9 percent as investors sold holdings in riskier assets. Prices have risen to records in the past two years partly because of a lack of investment in refineries and smelters.

``Rather than end this commodities cycle, if additional capacity construction is delayed, sustained tighter credit conditions could push a cyclical downturn in commodities further into the future,'' the New York-based analysts said.

Continued dollar weakening, which supports commodities denominated in the U.S. currency, delays to mergers and leveraged buyouts and the onset of the Atlantic hurricane season are likely to keep investment in raw materials ``strong,'' according to Lehman. The dollar has dropped about 3.4 percent against the euro this year.

`Bullish Tone'

Near-record oil prices may still prompt investors to sell contracts, exacerbating a decline in prices from seasonal peaks often reached in August and September, the bank said. Oil in New York has fallen about 7 percent from a record $78.77 a barrel on Aug. 1.

Prices are unlikely to drop below $60 a barrel ``for any significant period'' this year, Lehman said. The contract traded at $72.69 a barrel today.

The peak of the U.S. hurricane season, which may disrupt oil supplies in the Gulf of Mexico, together with the prospect of a continued restraint in production by OPEC, which meets on Sept. 11, may ``lend a bullish tone to commodity investor psychology,'' Lehman said.

The Organization of Petroleum Exporting Countries supplies about 40 percent of the world's oil. The group has been restricting supply since late last year and OPEC ministers have so far resisted increasing output because inventories in consuming nations are ample.

Global `Insulation'

Appetite for commodities is unlikely to be curbed this year or next year because Asian demand will continue, the U.S. housing market isn't heavily reliant on imports and because of the ``relative insulation'' of the global economy from U.S. subprime woes, Lehman said.

``We do not expect future commodities demand to be reduced unless the U.S. enters a broad-based recession,'' the bank said. ``Even then, considering remarkably stable developing-country demand growth, it would take some time, beyond 2008, before a U.S. recession spread to other commodity demand growth centers.''

To contact the reporter on this story: Saijel Kishan in London at skishan@bloomberg.net

Last Updated: August 13, 2007 13:27 EDT