The commodity collapse that sent gold to a five-year low and pulled crude oil into a bear market isn’t showing any signs of slowing down.
The Bloomberg Commodity Index fell 4.3 percent this week, the most since November, and extended a drop to a 13-year low. Shares of Freeport-McMoRan Inc., the biggest publicly traded copper producer, are poised for the worst week since 2011 as the metal dropped to a six-year low in New York. Brent oil is on its way to the longest run of weekly declines since January.
Fresh evidence of the slowdown in China, the world’s top consumer of metals, grains and energy, helped prices extend losses on Friday. The Bloomberg commodity measure has tumbled about 28 percent over the past year amid expanding gluts. Investors are still holding a net-long position, or bets on a price gain, across raw materials. They increased those wagers in each of the past four weeks, leaving bulls vulnerable to suffering through July’s rout.
“This is about the deceleration of the demand,” Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, New Jersey, which oversees about $170 billion, said in a telephone interview. “The oversupply is prevalent, and will continue to be the theme over the next several quarters.”
Signs of weakening economic growth are piling up. In China, a private gauge of the nation’s manufacturing fell to a 15-month low. In the U.S., sales of new homes unexpectedly fell to a seven-month low in June, usually the industry’s busiest time of the year. In Germany, factory-output growth unexpectedly cooled in July.
The World Bank said this week that the outlook for commodities is looking grim for yet another year. Average prices for fuels such as crude, natural gas and coal will tumble 39 percent this year from 2014, while those for materials like metals and fertilizers will fall about 12 percent, the Washington-based lender said in its quarterly “Commodity Markets Outlook” released Wednesday.
U.S. crude supplies are almost 100 million barrels above the five-year average. The drop in prices is weighing on energy companies. Encana Corp., the Canadian natural gas producer which is switching its focus to oil, fell to a 13-year low Friday after second-quarter earnings missed analysts’ estimates. Exxon Mobil Corp.’s shares slipped to a three-year low, while Chevron Corp. declined to lowest since October 2011.