FxWirePro Commodities Watch (Energy)

Understanding commodities are vital to gauge the performance of other asset classes such as bonds, equities, and even currencies. Since, 2014, any regular follower of financial markets would be able to recall how devastating the drop in oil prices has been for many countries like Russia, Brazil, Mexico, and Malaysia whereas net importers of oil like India has largely benefitted from it. Hence, it is of utmost importance to investors to keep a tab on the trends in the commodities market.

We, at FxWirePro, have been sensing a change in tide in the commodities market. After months and years of battering by traders and investors, since last year, they are once again becoming the darlings. Many of the commodities have risen more than 40 percent last year and that figure in most cases will be much larger if we consider it from the bottom, which was largely made earlier last year. A more than 20 percent rise from bottom technically indicates a change in the trend.

In this commodities watch, we present to our readers, the performance of commodities, which in turn decide the well-being of many commodity producing and consuming nations. For example, China is a major consumer of soybeans, so if the price goes higher, it may drag the country’s trade balance as it imports most of its consumption.

Biggest producers:

• Ethanol – U.S. and Brazil together produce 85 percent of global ethanol.
• Brent Crude – Saudi Arabia, United States, Russia, Iraq, Iran, Venezuela, UAE, and Kuwait
• WTI Crude – Saudi Arabia, United States, Russia, Iraq, Iran, Venezuela, UAE, and Kuwait
• Natural gas – United States, Qatar, Russia, Australia

Biggest Consumers:

• Ethanol – United States, Brazil, and EU
• Brent Crude – United States, EU, China, India
• WTI Crude – United States, EU, China, India
• Natural gas – United States, EU, China, and Japan

In this article, we evaluate the YTD performance of Energy segment. This group has been the best performer of the year in 2016 but this year hasn’t been well so far. The energy market still remains troubled with higher supplies and higher levels of inventories.

• The best performer of the group is Heating oil, which is up 11.7 percent so far this year, followed by Brent crude (+9.4 percent), WTI crude (+5.6 percent), and Gasoline (+4.6 percent)
• The worst performer is Ethanol (-16.5 percent), followed by Natural gas (-16.4 percent.

Last year, this pack was the best performer with 38.5 percent average gains. But this year, the pack has not been doing so well. However, it has recovered from the earlier loss and is down marginally by -0.3 percent so far. The pack is down 4.8 percent since our last review back in November 2017.

Due to the continued supply glut in the market, the OPEC deal to reduce supply has so far failed to lift price.

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