Research Dept. News
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Monthly Report, num 336 - June 2010
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International review - Raw materials
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Risk aversion brings widespread declines
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Crude falls 16.5% due to higher risk aversion in the markets.
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Oil prices, after having come close to the threshold of 90 dollars at the end of April, were affected by the unrest in the debt markets and by a growing aversion to risk, resulting in them falling to 71.26 dollars per barrel (Brent quality, for one-month deliveries). Consequently, between 20 April and 20 May 2010, crude lost 16.5%, also partly due to the appreciation of the dollar, up 8.5% compared with the euro.
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With the return to normality, oil might reach over 80 dollars by year-end.
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The fragile expectations for economic recovery in the euro area and doubts regarding sovereign debt affected all commodities in general. As financial markets are gradually starting to get back to normal, and the recovery is still on track in the emerging countries and the United States, crude should regain ground and might end the year within the range of 80-85 dollars per barrel.
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Metals suffer from increased risk aversion and profit-taking.
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The rest of commodities were not immune to the effects of risk aversion. Consequently, the Economist index fell 8.1% between 20 April and 20 May. The biggest drops were to be seen in metals, where risk aversion was in addition to profit-taking after the strong appreciations of the last few months. After having reached their highest value since 2008 at the end of April, most metals saw an adjustment in price that resulted in them accumulating losses during the month. Nickel was down 22.4%, aluminium 17.5%, copper 15.1%, palladium 22.7% and platinum 11.6%. Given its status as a safe haven, gold avoided such a decline and was up 4.2% for the month as a whole, after reaching a record high on 13 May. With regard to foodstuffs, which had risen less, the drops were not so widespread. Wheat posted gains while sugar was the most affected, down 10.7%.
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