Commoditie Cap Record Losing Run on Crude Oil to DollarSharon Cho and Morgane Lapeyre
Commodities capped the biggest annual loss since the global financial crisis in 2008, retreating for a record fourth year, as a global glut spurred a rout in oil prices and a stronger dollar cut the allure of raw materials.
The Bloomberg Commodity Index, which tracks 22 products from crude to copper, ended 1.7 percent lower at 104.3285 points yesterday, after dropping as much as 1.8 percent to the lowest since March 2009 earlier. It lost 17 percent last year, with crude, gasoline and heating oil the biggest decliners. The fourth year of losses was the longest run since at least 1991.
Energy prices retreated in 2014 as a jump in U.S. drilling sparked a surge in output and price war with OPEC, which chose to maintain supplies to try to retain market share. The dollar climbed to the highest level in more than five years as a U.S. recovery spurred speculation that the Federal Reserve will start to raise borrowing costs this year. Commodities will probably be volatile in 2015, with crude oil poised to extend its slump, according to Australia and New Zealand Banking Group Ltd.
“What we’re seeing is that supplies from North America have really outpaced worldwide demand growth and as a result, we have a supply glut,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “And that of course has put pressure on prices over the last several months. And as a result, it’s dragging down commodities indexes as well.”
Brent for February settlement ended at $57.33 a barrel on the London-based ICE Futures Europe exchange yesterday after dropping 48 percent last year. West Texas Intermediate declined 1.6 percent to $53.27 a barrel on the New York Mercantile Exchange. Gasoline sank 48 percent last year.
A slowdown in China also hurt demand for raw materials as policy makers grappled with a property slowdown, and data yesterday showed a factory gauge at a seven-month low. China’s central bank cut interest rates in November for the first time since 2012 amid expectations that the biggest user of metals was set for the slowest full-year economic expansion since 1990.
Arabica coffee was the biggest gainer as the worst drought in decades eroded supplies in Brazil, the largest producer and exporter. Nickel rose the most among metals, gaining 9 percent to $15,150 a metric ton on the London Metal Exchange after Indonesia halted ore exports. Both commodities rose in the early months of 2014, before dropping in the final quarter.
While most commodities looked oversold, weak near-term fundamentals were unlikely to bring much confidence, ANZ analysts including Mark Pervan said in a report dated Dec. 22. An oversupplied market was likely to keep crude oil prices under pressure this year, they wrote.
Deutsche Bank AG last month cut its 2015 forecast for Brent to $72.50, down from an October prediction for an average of $88.75. Goldman Sachs Group Inc. expects Brent to average $80 to $85 a barrel in 2015, while WTI may trade at $70 to $75.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against major peers, advanced 11 percent in 2014 amid speculation the Fed may raise interest rates in the third quarter as the world’s biggest economy improves.