March 2016 Market Commentary 02 Commodity Performance BCOM 08 Roll Select 09 Historical 10 Contribution to Return & Weights 11 Commodity Volatility Realized 12 Implied 13 Historical Realized 14 Commodity Correlation Composites 15 Singles 16 US CPI Indices 17 Country CPI 18 Country GDP 19 Commitment of Traders Report Monthly Notional Change & Correlation 20 Historical Net Positions 21 Commodity Inventories & Sales Monthly Change & Correlation 23 Historical Levels 24 Commodity ETP Flows 26 Term Structures 27 Research Dashboards (BI) 29 Bloomberg Cheat Sheet 30 Contact us: <Help> <Help> on the Bloomberg Professional service 1-212-617-5020 [email protected]TABLES & CHARTS (BCOM) BLOOMBERG COMMODITY INDEX
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BLOOMBERG COMMODITY INDEX (BCOM) TABLES & CHARTS · 2016-04-15 · The Bloomberg Commodity Index (BCOM) returned 3.8% in March and capped an eight month losing streak. Commodities
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March 2016Market Commentary 02Commodity Performance BCOM 08 Roll Select 09 Historical 10Contribution to Return & Weights 11Commodity Volatility Realized 12 Implied 13 Historical Realized 14Commodity Correlation Composites 15 Singles 16 US CPI Indices 17 Country CPI 18 Country GDP 19Commitment of Traders Report Monthly Notional Change & Correlation 20 Historical Net Positions 21Commodity Inventories & Sales Monthly Change & Correlation 23 Historical Levels 24Commodity ETP Flows 26Term Structures 27Research Dashboards (BI) 29Bloomberg Cheat Sheet 30
Contact us:<Help> <Help> on the Bloomberg Professional [email protected]
TABLES & CHARTS(BCOM)BLOOMBERG COMMODITY INDEX
The Bloomberg Commodity Index (BCOM) returned 3.8% in March and capped an eight month losing streak. Commodities received a boost from a weakened dollar -- the Bloomberg Dollar Index sank to a nine month low as the Fed was seen putting off a rate increase. A 16% rally in gold kept commodities in positive territory in Q1.
Q1 Scorecard for Individual Bloomberg Commodity Indices: CRR <go>
Energy (29.7% of BCOM)
The Bloomberg Energy Index posted a 7.8% gain in March as WTI surged above $40 a barrel from a 12-year low. OPEC crude production rose in March as Iranian output climbed to the highest level in almost four years. Production increased by 64,000 barrels to 33.09 million a day in March, according to a Bloomberg survey of oil companies, producers and analysts.
Saudi Arabia pledged to freeze oil production if Iran and other major producers freeze production, the kingdom’s deputy crown prince said March 30. Even if Saudi Arabia and Russia were to pull off a diplomatic coup and persuade producers all over the world to join their oil-output freeze, it would have little impact on the global surplus. That’s because Iran and Brazil, the two countries the International Energy Agency predicts will add most supply this year, have shown little interest in participating. Even if other suppliers as diverse as Argentina and Equatorial Guinea agreed to cap output, their combined efforts would curb supply this year by just 50,000 barrels a day, or 5% of the global production surplus, IEA data show.
Even if Saudi Arabia wins its struggle with U.S. shale producers over market share, it will face a new billion-barrel adversary. It won’t be regional nemesis Iran, a resurgent Iraq or long-standing competitor Russia. The answer will be more prosaic: a stockpile surplus of more than 1 billion barrels built up since 2014 will remain, weighing on prices. Inventories will keep accumulating until the end of 2017, the International Energy Agency forecasts, and clearing the glut could take years.
Three months since the U.S. lifted a 40-year ban on oil exports, American crude is flowing to virtually every corner of the market and reshaping the world’s energy map. Overseas sales, which started on Dec. 31 with a small cargo aboard the Theo T tanker, have been picking up speed. Oil companies including Exxon Mobil and China Petroleum and Chemical Corp have joined independent traders such as Vitol and Trafigura in exporting American crude. The export activity is helping to support spot oil prices in the U.S. relative to contracts for later delivery. With American stockpiles at unprecedented levels, oil tankers laden with U.S. crude have docked in, or are heading to, countries including France, Germany, the Netherlands, Israel, China and Panama. Oil traders said other destinations are likely, just as supplies in Europe and the Mediterranean region are also increasing. That said, the U.S. is likely to remain for the foreseeable future a small exporter compared with OPEC giants Saudi Arabia, Iran and Iraq and non-OPEC producers Mexico and Russia.
The International Energy Agency said that oil prices may have passed their lowest point as shrinking supplies outside OPEC and disruptions inside the group erode the global surplus. Production outside OPEC will decline by 750,000 barrels a day this year, or 150,000 barrels a day more than estimated in February. Markets are also being supported by output losses in Iraq and Nigeria, and
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as Iran restores production more slowly than planned following the end of international sanctions.
China’s crude imports rose to a record as oil’s crash to the lowest in more than 12 years boosted buying. The world’s biggest energy user increased inbound crude shipments in February by 19% from the previous month to 31.8 million metric tons, according to data from the Beijing-based General Administration of Customs. That’s equivalent to about 8.04 million barrels a day, the highest daily average on record. Oil product exports slid a second month to 2.99 million tons, the lowest since May. The government’s decision not to cut retail fuel prices when oil falls below $40 a barrel has made domestic sales of oil products more profitable compared with exports, according to ICIS China, a Shanghai-based researcher. China has also pushed back completion of its emergency petroleum stockpiles to beyond the original 2020 deadline. The world’s largest energy consumer will finish construction of the second phase of its strategic oil reserves and begin preliminary work on additional sites by 2020, according to the 2016-2020 Five Year Plan. The country’s previous plans called for three phases to be completed by the end of the decade.
As crude has soared more than 50% since Feb. 11, the number of bets on increased prices has barely budged. Instead, the upward pressure on prices appears to have come from traders cashing out of bearish wagers at an unprecedented pace. The liquidation of short positions during the last seven weeks covered by data from the CFTC was the largest on record.
Pierre Andurand, a hedge fund manager who predicted the oil collapse, said crude is starting a “multi-year bull run” because low prices have curbed supply. Futures will rebound to $60 to $70 this year and $80 in 2017, the CIO of Andurand Capital Management LLP said in a newsletter to investors.
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Index FAQ: why is the index down if spot is up? The following graphs show how the WTI futures market has moved during Q1 and may help investors understand why benchmark indices can drop even as spot prices rise. Bloomberg WTI Index vs. Generic 1st WTI Contract
YTD, we can see that the generic 1st WTI futures contract moved up 3.4% while the Bloomberg WTI Index dropped 11.6%. The Index was composed of (only) the March 2016 WTI futures contract from 12/31/2015 to 02/05/2016 and rolled into the May 2016 WTI futures contract during the February rolling period until the end of the Q1. The March contract returned -26.8% from 12/31/2015 to 02/09/2016 (approximately middle of the February roll window) and the May contract returned 20.6% from 02/09/2016 to 03/30/2016, resulting in a total loss of 11.6% for the Bloomberg WTI Index. WTI Active Contract {CLA Comdty CCRV <go>}
As shown in the chart above, the futures curve was in contango on 12/31/2015 with the May 2016 contract priced at a $2.94 premium over the Feb 2016 contract. Winding the clock forward by three months, we see that the current first nearby contract (May 2016), although $1.24 higher than the previous first nearby contract (Feb 2016), is far below the expectation projected on the last day of 2015, resulting in a loss for the futures investor. Grains (22.8% of BCOM) China will end its state corn stockpiling program this year, replacing it with other subsidies, amid surging reserves in the world’s second-biggest grower. The government will encourage state and private firms to buy corn at market prices and offer credit support to farmers, Xinhua reported Mar. 28, citing a press briefing by the National Development and Reform Commission. It will also promote changes in crop cultivation and move to reduce existing stockpiles. The changes will affect the 2016-17 season. China has about 1.4 billion mouths to feed and President Xi Jinping has singled out increasing agricultural output as among the country’s priorities. China has become the world’s largest importer of soybeans and purchases rose 14% to a record last year, customs data show. The country imports most of the soybeans it consumes, while rice and corn only represent about 2% of domestic usage, U.S. government data show. Heavy rain and flooding from Louisiana to southern Illinois and east to Ohio in early March probably damaged winter wheat, according to World Weather Inc. Freezing temperatures later in the month followed by dry, warm weather forecast into April may also stress plants in parts of the Great Plains. Abnormally dry ratings have increased in parts of Kansas, Oklahoma and Colorado, where hard red winter wheat is grown, U.S. Drought Monitor data showed.
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Global grain stockpiles remain ample, and hedge funds have held net-short positions in wheat futures and options. Bumper crops are set to boost European stockpiles to an eight-year high, clashing with expectations for reduced planting in the U.S. and the concerns about dry weather in the Great Plains. French milling wheat, which is usually more expensive than the comparable U.S. contract, is now trading at a discount.
Wheat exports from Argentina have been climbing since newly elected President Mauricio Macri eliminated most crop taxes and lifted four years of currency controls in December. A March USDA report boosted its estimate for Argentina wheat exports to 7 million tons, from 6.5 million, citing a stronger shipment pace.
U.S. farmers plan to sow 93.6 million acres of corn in 2016, exceeding all analyst estimates and boosting prospects for higher supplies after the harvest. Planting will rise 6.4% from a year earlier to the third-highest since 1994, according to the USDA. Farmers also told the government they intend to reduce soybean planting to 82.2 million acres, compared with 82.65 million in 2015.
Industrial Metals (17.5% of BCOM)
China's real copper demand may be half what the world thinks it is. Global copper demand may be 15% lower than expected. An analysis by Bloomberg Intelligence show that slow growth may mean that almost all of the increase in demand is due to financial carry trades using copper as the backing medium. China's carry trade -- which uses metals as collateral to finance deals -- inflated demand, kept prices higher and led miners to raise output. For more detail, run NSN O4SGDQ6TTDS2 <go> on your Bloomberg terminal.
Copper consumption, already falling outside of Asia, grew at the slowest pace since 2006 last year in China, according to the World Bureau of Metal Statistics.
Output is still increasing, with more than 4.5 million metric tons of new capacity planned to come online over the next four years, according to Bloomberg Intelligence estimates. Production has exceeded demand in 18 of 19 months through January, according to the World Bureau of Metals Statistics.
In the U.S., annual consumption of refined metal has fallen in five of the past 10 years and is 21% lower over that period, at 1.79 million tons, according to the World Bureau of Metal Statistics. Of the 18 end-use markets tracked by the Copper Development Association, the only gains from 2004 to 2014 were in power cable, automotive wire and transportation equipment. Excluding Asia, the combined consumption in the rest of the world shrank 20% in the past decade, data compiled by Bloomberg Intelligence shows. Even in China, Goldman Sachs is predicting zero growth this year. The Lisbon-based International Copper Study Group on March 10 forecast “essentially flat” global usage this year for refined copper, excluding stockpiling, even as output rises, creating a surplus through next year.
Aluminum extended declines after the world’s largest maker of the metal, China Hongqiao Group, said it will expand capacity by 16% this year. Bulls are fleeing the aluminum market as traders are holding the fewest bets on aluminum prices in more than eight years on the LME. A 7% slump in open interest in March coincided with the largest drop in prices in four months. That combination typically signals the closing out of bullish wagers. JPMorgan is recommending investors sell aluminum because smelters in China, the biggest producer, may resume production after cutbacks. Global inventories of the metal total a record high of more than 15 million metric tons, according to Macquarie.
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Aluminum Open Interest at 8-Year Low
Traders keep pulling material out of LME warehouses. The amount stored in depots tracked by LME has almost halved from a 2013 peak and is near a seven-year low. Copper and aluminum have accounted for the bulk of the decline. Inventories of aluminum are near a seven-year low and there will probably be more withdrawals. Orders to remove aluminum surged 26% on 17 March on requests to get the commodity out of depots in Vlissingen, and rose 14% on 18 March due to bookings in Detroit as the LME tightens warehousing rules to prevent queues from building and traders have been moving metal outside of the network to benefit from cheaper storage charges. Traders have been shifting copper from LME-tracked warehouses to China to take advantage of arbitrage opportunities, boosting the amount held in facilities monitored by the Shanghai Futures Exchange to a record. Reserves tracked by LME have declined to the lowest level in more than a year. The movement has also been spurred by traders purchasing metal priced in dollars as a currency hedge amid expectations of a weaker yuan. Prices for immediate delivery are at the highest premium since August to the benchmark contracts - one indication that supplies are limited.
Precious Metals (17% of BCOM)
Gold is the best-performing asset in the Bloomberg Commodity Index this year, with a return of 17% in Q1, after turbulent financial markets and weakening economies boosted demand for the metal as a haven. Flows into exchange-traded products backed by gold have been a significant source of demand, with holdings rising 21% to 1,761.3 metric tons after falling in 11 of the previous 12 quarters. The demand for gold ETFs have been so high that BlackRock temporarily stopped issuing new shares in its $7.4 billion iShares Gold Trust. Investors had piled into the fund so fast that the asset manager didn’t register in time with the SEC to issue more shares. The fund created more shares in February than at any time in the last decade and the fund has expanded by $1.4 billion so far this year.
Gold has rallied more than silver this year, stretching the price ratio between the two metals to about 80. That’s historically led to higher silver prices. The last three times that the ratio exceeded and then fell back below 80, silver then outperformed gold in the following two to three years.
The spread between gold and silver hasn’t been this great for more than seven years and with mine supplies forecast to contract this year that may be a sign it’s ready to come out of gold’s shadow. Mine production of silver may drop in 2016 for the first time in over a decade as about two-thirds of the world’s silver output is a byproduct scraped up when companies dig for base metals. As producers react to weak Chinese demand by slashing output of copper, zinc and lead, a side effect is silver prices are getting a boost as less of the precious metal is unearthed.
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Softs (7% of BCOM) The Bloomberg Sugar Index rose 6.9% in March and has climbed 12.7% in the past year. Sugar futures in New York rallied to a 17-month high in March as the strongest El Nino in two decades parched crops in China, India and Thailand, exacerbating a global deficit. The world market is heading for a second annual deficit, following half a decade of surpluses. Raw sugar production may fall by the most in seven years to 171.1 million tons in the 2015-16 season as droughts in Asia are reaching the “worst-case scenario,” researcher F.O. Licht estimates. World consumption will exceed production by 4.95 million tons of raw sugar in the 2016-17 season, 19% more than a January forecast, Green Pool Commodity Specialists said. The researcher also raised its estimate for the 2015-16 shortage to 6.65 million tons from 4.14 million tons previously. Coffee futures, mired in bearish territory for most of 2015, entered a bull market as adverse conditions from El Nino threaten to shrink output of premium arabica beans. Crop estimates from some analysts for Brazil, the top grower, and Colombia, the second-biggest, are falling after the weather pattern brought dry conditions and exacerbated the spread of plant disease. In 2014, futures soared 50% as drought ravaged Brazil. Inventories monitored by ICE Exchange have slumped to the lowest November 2011.
Livestock (5.8% of BCOM) Hedge funds are loading up with pork. With Americans expected to eat the most pork since 2007, money managers are now the most-bullish since 2014 on hog futures, which already are at a nine-month high (LHA Comdty COT <GO>). Demand at home and abroad is rising faster than U.S. farmers are boosting output. Pork remains a cheaper alternative to beef cuts that last year surged to records as supply shrank. The Bloomberg Lean Hogs Index returned 7.4% in Q1.
Beef is now so expensive in Argentina, which once was the third-largest exporter, that slaughtering plants are about to start importing cattle from neighboring countries for the first time in almost two decades. It’s a big switch for a population that eats more beef per person than any other and where the meat has become as much a part of their national identity. Rising costs have encouraged what was almost unthinkable a decade ago: beef demand is dropping, and consumers are substituting with cheaper chicken and pork.
Argentina’s cattle industry was upended by the end of price controls and a devaluation of the peso under newly elected President Mauricio Macri, who altered the policies of his predecessors to revive an economy hobbled by a government debt default. In December, the price of beef used for barbecues known as asados surged 28%. To ease the strain, Macri authorized imports of beef and cattle from neighbors like Uruguay.
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Composite Indices* Click hyperlinks to open in Bloomberg
2015Mar Feb Q1 Q4 1-Year 3-Year 5-Year 10-Year 20-Year
Bloomberg US Treasury Bond Index BUSY 3.91% 3.86% 4.26% 3.95% 4.09%Bloomberg USD IG Corporate Bond Index BUSC 3.41% 3.53% 4.24% 4.15% 4.36%Bloomberg USD HY Corporate Bond Index BUHY 5.18% 6.45% 4.57% 3.63% 3.41%
Bloomberg U.S. Dollar Spot Index BBDXY 7.17% 6.94% 6.84% 6.20% 6.40% 7.10%
BloombergCommodity Index TRS&P 500 Total ReturnIndexBloomberg USTreasury Bond IndexBloomberg USCorporate Bond IndexBloomberg USD HYCorporate Bond IndexBloomberg U.S. DollarSpot Index
GLD US SPDR Gold Shares 2,290.72 30,015.30 7.6%SLV US iShares Silver Trust 321.93 4,587.34 7.0%DGL US PowerShares DB Gold Fund 72.72 143.86 50.6%SCO US ProShares UltraShort Bloomberg Crude Oil 72.34 170.01 42.6%
FTGC US First Trust Global Tactical Commodity Strategy Fund 58.28 161.19 36.2%UNG US United States Natural Gas Fund LP 57.42 439.26 13.1%DBC US PowerShares DB Commodity Index Tracking Fund 51.51 1,843.18 2.8%GSG US iShares S&P GSCI Commodity Indexed Trust 41.47 665.18 6.2%DBP US PowerShares DB Precious Metals Fund 37.22 117.31 31.7%
SGOL US ETFS Physical Swiss Gold Shares 36.56 919.69 4.0%
All Commodities Sector: Top 10 Redemptions
Ticker Name Net Flows ($ mill)
Beginning Fund Market Cap
($ mill)
% of Funds Market Cap
USO US United States Oil Fund LP -671.69 3,819.30 -17.6%UWTI US VelocityShares 3x Long Crude ETN -388.50 969.67 -40.1%UCO US ProShares Ultra Bloomberg Crude Oil -138.06 780.50 -17.7%IAU US iShares Gold Trust -81.45 7,417.27 -1.1%OIL US iPath Goldman Sachs Crude Oil Total Return Index ETN -16.27 663.44 -2.5%
KOLD US ProShares UltraShort Bloomberg Natural Gas -9.80 16.97 -57.7%UGLD US VelocityShares 3x Long Gold ETN -8.98 74.56 -12.0%DBO US PowerShares DB Oil Fund -7.61 425.71 -1.8%DNO US United States Short Oil Fund LP -4.55 33.07 -13.8%UGAZ US VelocityShares 3x Long Natural Gas ETN -4.06 218.30 -1.9%
BLOOMBERG INTELLIGENCE: COMMODITY DASHBOARDS BI <GO> * Click hyperlinks to open in Bloomberg
Crude Oil Production: BI OILS <GO> Natural Gas Production: BI NGAS <GO>
Precious Metal Mining: BI PMET <GO> Agricultural Chemicals: BI AGCH <GO>
Copper: BI COPP <GO> Aluminum: BI ALUM <GO>
BI provides analysis on several key drivers of BCOM performance; industrial and precious metals mining, oil and natural gas production, and agricultural chemicals. The dashboards include key macro data libraries and interactive charting and commentary from analysts with an average of seventeen years of experience.
COMMODITY CHEAT SHEET FOR THE BLOOMBERG PROFESSIONAL® SERVICE
* Click hyperlinks to open in Bloomberg
Broad Commodities EnergyTop commodity news CTOP Top energy news ETOPGlobal commodity prices GLCO Top oil news OTOP Commodity playbook CPLY Crude Oil Production Dashboard BI OILSCommitments of traders report COT First Word oil NI BFWOIL Calendar of commodity events ECO17 News on oil inventories TNI OIL INV Commodity arbitrage calculator CARC Oil Buyer's Guide newsletter NI OBGBRIEFCommodity fundamental data explorer FDM Pipes & Wires newsletter NI PAWSBRIEFCommodity futures overview CMBQ Oil market analysis BOILSecurity finder SECF Nat gas spot prices BGASCommodity data contributors & broker CDAT Forward European utility markets EUMContract table menu CTM News on oil markets NI OILMARKET Seasonality chart SEAG News on OPEC NI OPEC Commodity curve analysis CCRV OPEC production and prices OPECCommodity fair values CFVL Oil markets menu OIL Commodity price forecasts CPFC Crude stored in tankers NOONCommitments of Traders Report COT Refinery outages REFOCommodity maps BMAP Oil’s decline EXT5 Commodity options monitor OMON Oil versus inflation expectations SWIFCommodities charts COSYCommodity Investors menu CMNV MetalsUS exchange traded product fund flows ETF Top metal news METT
Precious metal dashboard BI PMETGBase metals dashboard BI BMET
Commodity Indices Metals prices and data MINE Index description BCOM Index DES Precious metals prices and rates MTL Index constituent weights BCOM Index MEMB Metals Bulletin MB Listed index futures BCOM Index CT COMEX inventories COMX Option volatility surface BCOM Index OVDV LME monitor LME Seasonality chart BCOMNG Index SEAG LME implied volatilities LMIV Commodity index futures movers FMV LME warehouse inventories LMEI Commodity index ranked returns CRR
AgricultureWeather Top agriculture news YTOP Global weather database WETR Agriculture calendar AGRI US snow monitor SNOW Agriculture spot prices AGGPEU weather & utility models EUMM Agriculture supply & demand AGSD
Crop calendar CCAL
BCOM QUICK FACTS
Weighting Bias 2/3 market liquidity and 1/3 world production No. of Commodities 20 Re-balancing Frequency Annual Roll Schedule Monthly (5 day roll) Caps/Limits Single commodity: max 15%
Single commodity and its derivatives: max 25%Related commodity groups: max 33%
First Value Date 30 December 1990
The data provided in this report can be easily accessed on the Bloomberg Professional® service along with numerous news and analytical tools to help you stay on top of the commodity markets.