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Manic month for commodities but will it be a mad March?
Commodities saw the best monthly performance since July 2012. The broad based UBS-DJ index rose more than 5 percent. The gains were largely driven by the agriculture sector being affected by adverse weather in Brazil and the US. Growth dependent commodities such as energy and industrial metals were also up, but worries about a slowdown in China and the US held back these two sectors from making significant gains. Worse than expected economic data from the US helped precious metals to perform thereby forcing a rethink about the 2014 direction of these metals
Most commodities apart from iron ore and copper showed a positive return.
- Coffee, sugar and soybeans driven higher by adverse weather in Brazil.
- WTI Crude found support from elevated refinery demand due to increased demand for distillate products such as heating oil together with a 14 percent reduction of inventories at Cushing, the former bottlenecked delivery point for WTI Crude oil futures traded in New York.
- The discount to Brent Crude narrowed by more than two dollars as the North Sea oil
- Natural gas together with Coffee attracted much of the attention. The price jumped by a quarter to a five year high before collapsing back to almost unchanged on the month
The month ahead:
Coffee prices should stabilise with hedge funds now fully engaged, while lower production news from Brazil now should be priced in.
Natural gas should find support around the USD 4.5/therm level in order to ensure strong production during the injection season from March to November.
Gold maintains a positive momentum above the 200 day moving average at 1300, but further upside beyond the Oct high at 1362 seems limited for now unless the Ukraine crisis escalates and US data continue to disappoint
Brent and WTI Crude have limited upside above 110.5 and 104 respectively
03:18 minutes
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