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November Sees Consolidation In Commodity Markets

Commodities were lower in November, largely driven by macroeconomic factors, according to Credit Suisse Asset Management.

The Bloomberg Commodity Index Total Return performance was negative for the month, with 15 out of 22 Index constituents trading lower.

Credit Suisse Asset Management observed the following:

  • Energy was the worst performing sector, down 10.47%, led lower by crude and petroleum products, as the market continued to price in expectations for growing excess supplies.
  • Industrial Metals declined 3.37%. Copper led base metals lower after a three-week strike at the sixth largest copper mine in the world came to an end, easing production concerns. Chinese demand concerns also continued, as economic growth remained lower.
  • Agriculture was down 1.14%, led lower by Cotton. China decreased its imports of cotton after accumulating inventories for the past three years to support its domestic growers while India, the world's largest producer, is set to harvest another record crop this year.
  • Precious Metals decreased slightly, down 0.68% for the period. Silver was lower due to forecasts for weaker industrial demand.
  • Livestock increased slightly, up 0.83%. Live Cattle rose due to continued growth in beef demand while supplies remained tight. In November, the USDA forecasted US cattle production will decline by 3.2% in 2015.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management said: "During November, weather-related supply shocks were supportive of some index constituents while macroeconomic factors continued to be mixed. Extreme cold conditions across the US increased fears that there will be a repeat of last year's difficult winter, driving Natural Gas prices higher. However, most of the global focus may remain on oil. If prices continue to fall, pressure may mount on OPEC to eventually cut production.

Tensions may increase between oil producing nations who can function despite lower oil revenues against countries who depend on higher oil prices to balance their budgets. In the US, although lower oil prices may increase household income, the impacts are no longer purely positive as a significant proportion of US economic growth is currently coming from the production of energy and transportation infrastructure."

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "Overall, the US showed further signs of growth, including an upward revision in GDP and a lower unemployment rate. Meanwhile, Japan unexpectedly moved into a recession, despite higher exports reported for October. ECB President Mario Draghi strengthened his convictions towards quantitative measures to ease disinflation concerns within the European Union.

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