Coverage: Commodities still top story

The price of oil has been making headlines for weeks, and this one is no exception with oil falling to its lowest level in six years. As prices keep dropping, the coverage gets more intense.

Heesu Lee had this story for Bloomberg:

Oil fell to the lowest level in almost six years as signs that Saudi Arabia’s new king will maintain its production policy and rising U.S. crude inventories bolstered speculation that a global glut will persist.

Futures dropped as much as 2.7 percent in New York, extending a 6.4 percent slide last week. King Salman Bin Abdulaziz, who took over after the death of King Abdullah on Jan. 23, pledged to maintain the policies of his predecessor in a speech on Saudi national television. U.S. stockpiles climbed to 383.5 million barrels last month, the highest level for December since 1930, the American Petroleum Institute reported.

Oil slumped almost 50 percent last year as the Organization of Petroleum Exporting Countries resisted calls to cut output even as the U.S. pumped at the fastest pace in more than three decades. Saudi Arabia, the world’s biggest exporter, has chosen not to reduce supply and count instead on lower prices to stimulate demand, according to Mohammad Al Sabban, an adviser to the kingdom’s petroleum minister from 1988 to 2013.

“Crude production needs to slow down first to decelerate the speed of stockpiling, which is seen to be even faster than during the 2008 financial crisis,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul, said by phone. “With Saudi Arabia, the market hardly reacted last week and will remain unchanged as King Salman is known to be very conservative.”

Reuters’ Luc Cohen said that some are predicting that pump gas prices are at their lowest:

Prices for regular grade gasoline fell to $2.07 a gallon in the survey dated Jan. 23 from the previous survey on Jan. 9.

The recent drop has taken prices down more than $1.24 a gallon from the same period a year ago, a decline driven by losses in the crude oil market from its June peak.

However, survey publisher Trilby Lundberg noted that the drop in pump prices was less steep than it had been in previous periods and that the price many wholesale customers paid for gasoline rose in the past 10 days, suggesting a bottoming-out or increase in retail gasoline prices could be looming.

“The street price crash is either coming to an end or is already at its bottom,” Lundberg said, noting that it would take another substantial slide in the price of oil to reverse the gains in wholesale prices.

The Wall Street Journal said in a story by Leslie Josephs that despite the decline, some investors were adding to their commodities holdings:

A few brave investors are betting the gloom oppressing global commodity markets is on the verge of lifting.

The world’s farmers, mining companies and oil producers spent billions of dollars over the last decade to increase output. The result: huge surpluses and sharply lower prices for commodities ranging from oil to sugar to iron ore.

The magnitude of the decline has exceeded the expectations of the vast majority of investors and analysts. The Bloomberg Commodity Index, tracking 22 commodities, fell for a fourth straight year in 2014 and is down 3.1% this year.

But some investors see the seeds of a recovery in daily reports of plunging prices. They are buying some of the hardest-hit commodities, in a bet that low prices will quickly force producers to cut back, erasing the global surpluses behind the multi-year slide.

Many of these money managers acknowledge that a rebound may still be months off but say they are willing to endure some short-term losses rather than miss an opportunity to get in early on the next rally. And though analysts predict months, or even years, of low prices for some commodities, bullish investors take heart that while many observers saw signs that the decadelong commodity boom was nearing an end, few predicted the extent to which prices would crash.

The Globe and Mail story by Luzi Ann Javier said that some are moving money into precious metals since the price of gold and silver are rising:

Investors’ desire for precious metals is deepening after the European Central Bank’s $1.3-trillion (U.S.) stimulus drove gold to a five-month high and silver to the brink of a bull market.

Their buying helped boost the value of exchange-traded products backed by gold and silver by $8.94-billion this month, the most since September, 2012, data compiled by Bloomberg show. Hedge funds and other speculators in futures are the most bullish on gold in two years and have bet more on silver in all but two weeks since the start of November.

At a time when the price of almost every other commodity is sinking, silver and gold are having their best start to a year in more than three decades.

“Silver is tied to gold, and they move with trust,” David Rosenberg, the Toronto-based chief economist at Gluskin Sheff & Associates, which oversees C$8-billion ($6.4-billion), said. “There’s an increasing number of global investors who are starting to lose trust in the world’s central banks.”

Gold rose 1.2 per cent to $1,292.60 an ounce on the Comex in New York last week, after touching the highest since August. Silver jumped 3.1 per cent to $18.30 an ounce.

Silver’s 17-per-cent advance this year in futures is almost twice the gain in gold. Even so, gold is still trading at 71 times the price of silver, compared with an average of 58 in the past decade.

Commodities investors are looking for anything to offset the drop in oil prices. Many are losing money and need stronger assets to help. The major question is how low will prices go before they start to climb. But for now, get ready for even more coverage until they start to stabilize.